Recent years have brought rapid increases in both the need and demand for higher education, just as the economic downturn of the 2010s has strained state budgets. These trends and others have compelled state officials to act. Increasingly, state policymakers, coordinating and governing boards for higher education, and other stakeholders are working to prioritize dwindling resources, incentivize quality, and better align institutional efforts with state goals. Many are also considering new outcomes-based funding models that explicitly tie state higher education funding to specific performance metrics.

Stakeholders should agree on metrics that represent their shared goals for higher education and on a method to tie those metrics to funding. Policymakers need sound information to make these decisions. While research on these issues is just emerging, several key themes are evident. For example, states should:

  • Consider how to use—and shape—the research agenda to ensure that outcomes-based funding models enhance the quality of education while improving student success.
  • Consider using student grades and learning metrics to monitor quality as they implement outcomes-based funding models.
  • Begin to incorporate appropriately researched quality metrics into funding models.
  • Undertake research to develop, implement, and evaluate appropriate methods for identifying workforce needs.
  • Aim toward including process metrics.
  • Wherever possible, draw on existing student outcomes data and diversity metrics for outcomes-based funding models.
  • Balance the need to adjust student outcomes for student characteristics with the need to be straightforward and understandable.
  • Strive to obtain buy-in from all stakeholders.

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