There used to be an unwritten — and oft-repeated — understanding among state officials: Higher education expenditures were not going to be part of a statewide performance measurement system. Today, that notion is changing. At least 20 states are at some stage of developing performance-based systems for funding their universities, according to research done on behalf of Complete College America, a nonprofit organization. Although other sources offer up different numbers, all agree that this phenomenon is expanding. 

To get a handle on the changes taking place, the Washington State Auditor’s Office reviewed the status of performance-based funding in a number of states. The report noted that Utah, which has had performance based funding since 1999, added “mission-based funding” in 2012-2013. “Campuses propose specific metrics based on their distinct missions,” according to the Washington report. “Each institution specifies a description, rationale [and] outcome assessment criteria to measure success and budget implementation plans.” This added specific institution-based measures to the more general, systemwide information that was already being reported. 

The kind of measures used varies widely from state to state. In many instances, the performance measures are simple outputs, such as the number of students attending state universities. That’s hardly the kind of outcome measure that could be most helpful in evaluating the success of universities in achieving their missions. As Michael Pagano, dean of the College of Urban Planning & Public Affairs at the University of Illinois at Chicago, puts it, “Legislatures always want to know, how large are our classes, and what is the graduation rate after six years? When you have data like that, you know a student has a degree, but you don’t know if a student has learned anything.”

New Mexico announced that it was moving into a performance-based funding formula a couple of years ago. But the state has never established targets. “They haven’t told the institutions of higher learning what they want them to do,” says Charles Sallee, deputy director of the New Mexico Legislative Finance Committee. As a result, the performance measures in the funding formulas — including course completions, research grants and points for students who reach 30 and 60 credit hours — are only used to compare one state institution to another and to divide up the 5 percent of funding that is tied to performance. But the funding formula doesn’t really work. Each higher ed institution ends up competing, and it comes at the expense of the other institutions. “They’re cannibalizing themselves,” Sallee says.

One state that has added more results-based measures to its funding formulas has been Tennessee. In 2011, it adopted a new outcome-based model for the almost 5.5 percent of state appropriations governed by performance. The metrics include student satisfaction, job placement results, academic program accreditation, and the use of licensure/certification exams whenever possible.

In addition to the different measures states use, the degree to which they impact actual funding also varies place to place. In Illinois, only about 1 percent of funding was tied to performance, according to the Washington report. In Ohio, it’s been 10 percent and may be going up.

Increasingly, universities are actively involved in working with state legislatures to develop means for tying funding to measurement. “There’s been a recognition that they have to be at the table with the legislature,” says Bruce Vandal, senior vice president of results at Complete College America.

This isn’t necessarily a sign of genuine buy-in. Rather, it may be a case of co-opting reality. If the legislature is going to pursue measurement as a means for funding universities, it’s better to help create the system rather than be required to comply with an approach developed without input. 

Underlying that is a fact of life: Generally, colleges tend to be hostile to government oversight. “They don’t like accountability and they don’t like oversight,” says Michael Meotti, a former commissioner of higher education in Connecticut. “State institutions want to find ways to protect their own turf. Not every single one of them, but most of them.”

Of course, the goal of tying funding to performance is to focus attention on improving performance. The Washington report indicated that Oklahoma officials, who implemented performance funding in 2013, have shifted their focus from cost to improvements in higher education performance.

Still, some Oklahoma officials argue that it is difficult to change the thinking within higher education. Some presidents, they noted, are invested in the old system and have difficulty transitioning to performance-based methods.

It has long seemed to us that the best way to measure the effectiveness of higher education is on the value it adds. Universities that admit mostly top-notch students are inevitably going to find it easier to achieve a whole variety of goals. We’d argue that the universities that have lower admission standards could be more dramatically instrumental in raising the quality of their students’ professional and personal lives — and that is just the kind of thing that should be rewarded.