Outcomes-Based Funding: Important Takeaways for State Policymakers
New papers argue public funding for student outcomes can prompt beneficial changes
INDIANAPOLIS—Lumina Foundation today released a second round of papers exploring how outcomes-based funding is being used to focus public colleges and universities on contributing to national postsecondary attainment goals. State policymakers increasingly are using these newer funding models to promote changes in institutional climate and culture that benefit both students and society. The latest analyses focus on policy lessons that have emerged from explicitly paying for outcomes such as on-time degree completion and increases in the numbers of at-risk students who graduate.
The papers feature analysis of outcomes-based funding models in Tennessee and Texas, a look at commonly used outcomes measures, and an examination of efforts to gauge effects on the quality of learning:
- Early results of outcomes-based funding in Tennessee by Nate Johnson, founder and principal consultant, Postsecondary Analytics, LLC
- Structuring state policy for student success: Applying incentives in the Volunteer State by David Wright, chief policy officer, Tennessee Higher Education Commission
- Linking appropriations for the Texas State Technical College System to student employment outcomes by Jeffrey Selingo, author and columnist; and Martin Van Der Werf, associate director of editorial and postsecondary policy, Center on Education and the Workforce, Georgetown University
- Employing postsecondary data for effective state finance policymaking by Jamey Rorison, senior research analyst, Institute for Higher Education Policy; Mamie Voight, director of policy research, Institute for Higher Education Policy; and Jennifer Engle, senior program officer, Bill & Melinda Gates Foundation
- Higher education outcomes-based funding models and academic quality by Trey Miller, economist, RAND Corporation
“Lumina believes thoughtfully designed approaches to public financing must prioritize both college access and completion,” said Jamie Merisotis, president and CEO of Lumina Foundation. “A focus on equity in student outcomes is an essential objective of today’s outcomes-based funding models. In addition to increasing attainment, we must close the current achievement gaps for students of color and low income students. ”
Emerging evidence suggests public funding tied to student outcomes such as on-time degree completion leads to changes in institutional climate and behavior that benefit students. For these reasons, outcomes-based funding models should be closely aligned with state goals and objectives. For example, in Tennessee, David Wright describes how outcomes-based funding supports and advances broader priorities, including the state’s vision for a better-educated workforce. By focusing attention on the need for students to finish their education amid related policy initiatives, a stable outcomes-based funding model has generated significant improvements across Tennessee higher education. A paper by Nate Johnson found outcomes-based funding has reframed institutional practices and produced early indicators of student success, and he recommends additional research, which is under way.
Meanwhile, Texas policymakers have tried with only limited success to implement outcomes-based funding. In their paper, Jeff Selingo and Martin Van Der Werf, review how the Texas State Technical College System (TSTC) recognized that such funding would provide its 10 campuses with opportunities to link public support with the benefits TSTC graduates and certificate-holders contribute to Texas’ overall welfare, particularly the state’s tax base when students go from low- to high-wage jobs. Working with legislators, the technical college system crafted a funding model that rewards the system for enabling Texas to meet the high-tech challenges of today’s global economy.
The greater availability of data today makes it possible to focus public support on colleges and universities that are doing well by students. The Institute for Higher Education Policy found that in recent years there has been a shift from building robust data systems to translating data into insights that can inform policy and guide state-level and institutional decision making. In addition, focusing public funding on student outcomes, such as achieving academic progress milestones and graduation, can increase the urgency around collecting even more useful data for analysis. RAND Corporation researcher Trey Miller writes, “We need more and better data about student learning to ensure outcomes-based funding is leading to increased numbers of students with high-quality college degrees, certificates, and other postsecondary credentials.”
Outcomes-based funding provides a way for states to tangibly create an environment that allows institutions to focus on fairer outcomes for all students, particularly low-income and racial and ethnic minorities. An important objective of today’s outcomes-based funding models is a focus on equity in student outcomes. States are focused not only on increasing the overall number of students receiving credentials, but also on accelerating progress among underserved students. Tennessee’s broader policy agenda, reinforced through the design of its funding model, is grounded in increasing overall state attainment rates, something that cannot be accomplished without better outcomes for students of color and at-risk students, such as those from low-income families.
In his paper, Trey Miller casts this discussion of equity under the frame of quality—noting the varying successes of institutions in effectively serving different groups of students as an important element of determining an institution’s educational quality. He concludes we must do a better job of measuring student learning to ensure quality outcomes for students from all backgrounds.