By:
Nicholas Hillman and Daniel Corral
Department
of Educational Leadership and Policy Analysis
University
of Wisconsin, Madison
State
legislatures have increasingly turned to performance-based funding (PBF) as a
way to align financial incentives with educational goals. Each state designs
its model differently and in line with its own unique goals, but all tend to
prioritize outputs like: degrees awarded; credit hours completed; retention
rates; and even job placement rates.
Given
what we know about racial inequalities in these outputs, we wanted to
see how public Minority Serving Institutions (MSIs) fared under these new
funding models*. We started by taking a close look at Tennessee, where the state
allocates nearly all of its funds through a PBF formula. Predominantly white
institutions have garnered the lion’s share of new money from the funding
model, but the state’s sole public Historically Black university (Tennessee
State University) has received nearly no new money despite seeing steady
enrollment growth.
We
wanted to see if this pattern held across other PBF states and we found, on
average, it did.
It
is difficult to disentangle the policy effect from other confounding factors,
so we utilized a statistical technique that is both accepted by the field and
is designed to help answer our questions. Our main finding was that overall state
funding levels did not change significantly after adopting PBF policies. That
is, PBF states neither invest nor divest at higher rates than other states. But
when it comes to MSIs in PBF states, we see a different story. Our results show MSIs lost about $750 per
FTE student, on average, when compared to MSIs in states that never adopted the
policy. We interpret these results as exploratory and in need of closer
examination, particularly in the states that invest the most in this funding
model.
We
also interpret our results as something to keep a close eye on for MSIs and
other broad-access institutions serving racial and ethnic minoritized students.
Using performance metrics that do not account for their unique missions and
limited resources, these models might do little to reverse inequalities. For
policymakers interested in mitigating inequalities and promoting civil rights,
this study may motivate
them to take a closer look at the distribution of their funding formulas. It
may even point to alternative approaches to funding (e.g., equity-based funding
or innovation grants), where policymakers might consider new ways to build
institutional capacity to improve internal performance.
There
is much work to be done on this topic. Future research may consider how
educational outcomes and resources at specific MSIs are affected by these
policies. We hope our study contributes to ongoing efforts to improve funding
models and to consider issues of equity and fairness in that pursuit. Left
uncorrected, these results suggest funding models have the potential to work
against college completion goals if it turns out that MSIs truly are
disadvantaged by these models. The answer to this question will vary from state
to state, but regardless of the context we hope our study helps advance
opportunities for the greatest number of our nation’s students of color and the
colleges where they enroll.
*This study
is part of a special issue in American Behavioral Scientist–edited by William
G. Tierney and James Dean Ward—titled, “The role of state education policy in
ensuring access, achievement, and attainment in higher education.” Please click
here to review other
studies in this volume looking closely at the state role in educational
opportunity.
