Equity Measures in State Outcomes-Based Funding

In a majority of states, funding for public postsecondary institutions is partially based on performance or outcomes. Typically, it’s a relatively small amount of funding. However, some states have more expansive policies. For instance, Ohio bases 100 percent of its community college funding decisions on outcomes. Additional states, including Arkansas and Wisconsin, are updating or expanding their outcomes-based or performance-based funding systems.

In order to succeed with this approach, states need to build robust “equity measures” into their funding formulas. Research implies that using outcomes-based funding without equity measures disincentivizes colleges from helping low-income, underprepared, and/or adult students, as well as students of color, enter and complete programs.  

How does this process work? Why does it matter to these students? Performance- or outcomes-based funding awards state funding to institutions based on outcomes like completion of certificates, associate’s degrees, or bachelor’s degrees.  If students are perceived as less likely to attain such outcomes, institutions may act, intentionally or unintentionally, to increase selectivity in ways that leave these students behind. This type of funding may also drain open-access institutions of much-needed funding to help high-need students get over the finish line to completion.

What are equity measures? These measures reduce disincentives to serving low-income, underprepared, and/or adult students as well as students of color. They can also give open-access or other non-selective institutions the resources needed to best serve these students, who may require more costly support to move toward completion. Examples of equity measures include the number of Pell recipients who attain credentials, the number of students who progress through developmental education and earn their first credits, or a bonus on the graduation measure for students of color. A new report from CLASP provides a detailed classification system for existing state equity measures as well as recommendations for how they could be improved.

The general concept of equity measures is important to understand for anyone advocating for low-income, underprepared, and/or adult students as well as students of color. States must ensure their public postsecondary institutions receive incentives and resources to serve these students effectively—enabling them to earn credentials, succeed in the workforce, and climb out of poverty.