Describes the shifts toward outcomes-based funding, also known as performance-based funding, within the public postsecondary education system; and describes how state policy makers and colleges and/or technical schools can use equity measures to ensure that low-income and underprepared students are not adversely affected as these institutions move toward incentives that may increase selectivity. 

“State funding for public postsecondary institutions has traditionally been based on enrollment, but [at the time of writing] more than two-thirds of states use or will soon use some form of outcomes-based funding (OBF) or a previous model known as performance-based funding (PBF) in four-year, two-year, and/or technical colleges. Although many states have experimented with one of these forms of performance funding, to date, only a few states have tied a significant percentage of state funding to outcomes. [OBF] rewards institutions for student outcomes, like student progress or completing degrees. By comparison, [PBF] may focus on a number of performance measures, but not primarily on student credential attainment outcomes…. In [the years preceding this report], a growing number of states have considered implementing more robust [OBF] systems….

Given states’ anticipated increases in the percentage of state funding tied to outcomes… institutions may respond to these budgetary incentives by increasing selectivity to make achieving outcomes easier. This would make it more difficult for low-income or underprepared students to access or complete postsecondary education and earn the credentials they need to succeed in today’s economy.

When done right, OBF can motivate institutions to target resources to underserved populations. But without proper safeguards, OBF may lead to reduced student access and/or cut the budgets of the open access institutions, like community colleges, that serve these students, exacerbating the already low per student funding levels at such institutions. Likewise, the burden of these reduced investments can translate to increased levels of unmet need for low-income students.

In this paper, [the authors] refer to `equity measures’ as performance measures within an OBF system that serve two related purposes: First, they counteract or mitigate OBF’s incentives for public postsecondary institutions to increase selectivity... Second, equity measures can help ensure that institutions serving students most in need have sufficient resources to help them succeed” (p.2).

“[T]his paper provides a classification of equity measures, offering a systematic way to talk about and compare the variety of equity measures in states’ OBF systems” (p.2).

(Abstractor: Author and Website Staff)

Full publication title: “Equity measures in state outcomes-based funding: Incentives for public colleges to support low-income and underprepared students”

Major Findings & Recommendations

Based on an analysis of outcome-based funding systems, the authors offer the following recommendations to state policymakers: • “States should identify whether they have any equity measures. If so, a state should classify the equity measures to have a complete understanding of how the incentives may impact low-income students…. • States should closely examine the best practices emerging from other states and develop or refine their policies accordingly…. • Newly developed state OBF systems should include strong equity measures from the start. • States should add equity measures to OBF formulas if they don’t have them already. • If an OBF system already includes equity measures, states should ensure that the weighting of direct and bonus measures is sufficient to counteract the strength of the incentives to increase selectivity, based in part on how much state funding is distributed by outcomes. The weighting of the equity measures should be commensurate with the magnitude of the funding that could lead to institutional incentives to restrict access for low-income and underprepared students. • State OBF systems should make at least some equity measures (whether direct or bonus) mandatory, rather than optional” (p.14). The paper also includes a worksheet to help state policymakers classify their state’s OBF systems and design strong equity measures. “By building robust equity measures into their OBF formulas for postsecondary institutions, states can target their resources at policies that educate a prepared workforce and increase economic and racial equity and mobility” (p.14). Abstractor: Author and Website Staff