New Evidence on Performance-Based Funding; Equity Measures Needed to Avoid Admissions Restrictions and Other Pitfalls for Low-Income Students

Admissions restrictions for underprepared students is the most commonly cited unintended consequence of performance-based state funding for public postsecondary institutions, according to a new book released by the Community College Research Center (CCRC). Low-income students and students of color are disproportionately represented among the groups who are harmed by these practices. The book, Performance Funding for Higher Education, studies experiences in three states and includes a chapter titled “Unintended Impacts of Performance Funding.”

CCRC’s research undergirds the need for states to incorporate equity measures as a significant factor in their performance-based or outcomes-based funding (OBF) formulas. Equity measures could be used to support incentive funding based on the number of low-income, underprepared, adult, or minority students graduating,  or the number of students who meet an interim measure of progress (such as successful completion of developmental education). Some states' formulas include such measures, but others do not, and states new to OBF should prioritize them.

According to CCRC’s study, performance funding policies can produce sizable unintended, negative impacts, particularly for the students who are least likely to succeed. The most frequent impact is restricted admission to community colleges and universities (67 of 124 interviewees). This includes 23 out of 66 community colleges, which must reconcile performance targets with their mission of open access for low-income and minority students. Additionally, some Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs) may be particularly hurt given their outreach missions. Other unintended impacts include weakening of academic standards, compliance costs, lessening of institutional cooperation.  

Interviewees reported several concrete mechanisms for restricting access, including:

  • Raising admissions requirements (30 of 67);
  • General restrictions (22 of 67);
  • Selective student recruitment (15 of 67); and
  • A shift toward non-need-based financial aid (6 of 67).

The chapter also discusses the troubling possibility that “those outcomes—though unintended by policy designers—may actually be intended by institutional actors.”

In light of these findings, it is clear that publicly funded colleges and universities need strong, concrete incentives to provide comprehensive services that help underprepared students persist in school, earn their degrees, and achieve economic success. States should build equity measures into their funding formulas as one way of providing those incentives to institutions.