In the early 2010s, as evidence accumulated that the performance-based funding (PBF) programmes established in the 1990s did not materially improve college and university completion rates, some states put in place what’s been dubbed PBF 2.0.
Under the original PBF model, states make bonus payments to colleges and universities on top of their base funding. The PBF 2.0 model adopted by Tennessee and Ohio, the two states examined in the first study to examine the equity impacts of PBF, published this month in the Journal of Higher Education, linked increased funding to benchmark outcomes and includes premiums for improved outcomes for historically under-served communities, such as older adults, low-income students and racially or ethnically minoritised students.
A widening gap
In “Incentivising Equity? The effects of performance-based funding on race-based gaps in college completion” (“Incentivising Equity”), Professor Monnica Chan, who teaches in the college of education and human development at the University of Massachusetts Boston, and her co-authors show that, far from closing the gap between white graduation rates and blacks and Latinx students, PBF 2.0 has widened it.
Chan and Professor Zachary Mable, who is research professor of education and economics at Georgetown University, Washington, DC, and Preeya Pandya Mbekeani, a post-doctoral research associate at the Annenberg Institute at Brown University, Providence, Rhode Island, examined Tennessee and Ohio, states with long-standing PBF policies that allocate between 80% and 100% of their funding through these policies. They asked two questions:
• Did the adoption of PBF 2.0 policies in these states impact the number of (junior college) certificates and (four-year) degrees awarded to under-represented racially minoritised (URM) students?
• Did the adoption reduce completion gaps between URM and non-URM students?
According to Mbekeani, performance-based policies represent differences in the way in which higher education institutions have traditionally been funded.
Mbekeani said: “They are based on certain student outcomes, such as how many students graduate or persist through college, rather than purely on enrolment. In the United States, there have been efforts to account for equity by including special bonuses or premiums for the completion outcomes of historically under-served groups – students from low-income families, students who identify as black or Latinx.
“There have been no other studies that have looked at the equity implications of these policies and whether they’ve been effective in narrowing completion gaps, not whether they boost enrolment, but whether gaps actually narrow.”
“These [PBF 2.0] policies were ineffective in reducing or closing completion gaps in the two states we studied.”
Synthetic model
“Incentivising Equity” does not directly compare the completion rates by URM students in Tennessee and Ohio. Rather, each state is examined through the lens of a “‘synthetic’ counterfactual” model covering the years 2004 to 2015.
The models were based on college and university completion data and covariates for both URMs and Non-URMs from 16 states that did not use the PBF 2.0 funding model. These states include California, Arkansas, New Hampshire, Vermont and West Virginia.
To ensure that the models are not affected by changes in a college’s status from being a two-year to a four-year institution, the research team examined 1,250 out of a possible 1,695 colleges and universities in the creation of the synthetic model.
The PBF 2.0 incentives established by the governments of Ohio and Tennessee were substantial. Ohio, for example, which had allocated 80%-100% of its funding on the basis of student progression and completion, began placing greater weight on completion (which for the four-year bachelor degree is extended to six years).
While premiums varied over the period and for different schools, over the period the research team studied (2009-15), four-year institutions were eligible to receive between 30% and 40% increased funding based on their URMs’ performance. Students who fit into more than one category – for example, they were older URMs – brought their institution increased bonus payments.
Tennessee provided additional funds to colleges and universities which otherwise would have suffered from the shift away from enrolment-based state grants. Tennessee did not, as Ohio did, identify black and Latinx students.
However, “adult and low-income college students in Tennessee are more likely to be students of colour”, which allowed the team to “explore whether the equity provisions of PBF 2.0 have spillover effects for other historically disadvantaged groups that are not explicitly prioritised”.
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