Popular but Unstable: Exploring Why State Performance Funding Systems in the United States Often Do Not Persist

Issue/Topic: Postsecondary Finance--Performance-Based Funding
Author(s): Dougherty, Kevin; Natow, Rebecca; Vega, Blanca
Organization(s): Teachers College, Columbia University
Publication: Teachers College Record
Published On: 2012

Between 1979 and 2010, half of US states enacted performance funding policies for higher education. These policies tie state funding directly to institutional performance on specific indicators (e.g., first-year retention, degree completion, credit accumulation, job placement). This qualitative research study examines the political-cultural characteristics of states that later suspended or abandoned their performance funding systems.

To analyze the factors that have led many states to abandon their performance funding systems for higher education; to indicate how states considering performance funding could avoid the pitfalls of other states.

Conditions that Expedite Demise of Performance Funding Systems
  • Changes in political culture: loss of key support from previous legislative and gubernatorial champions; change of party control; budget constraints
  • Reactions from the higher education and business communities: hostility and indifference to changes, respectively
  • Program development: lack of consultation with postsecondary systems and institutions; unilateral development by legislative or gubernatorial officials; program initiated through appropriations, not statutory process; and conflicting incentives from different fiscal programs.
  • Program structure: holding back part of appropriations until institutions reach, exceed benchmarks; metrics do not account for variations in institutional missions

Conditions that Improve Sustainability of Performance Funding Systems 

  • Congruence: Higher education community and legislatures have common definition of what constitutes proper performance goals.
  • Flexibility: Institutions can develop local metrics based on mission, capacity, and main populations served.
  • Joint adoption: In places like Tennessee, performance funding thrives because of broad system and institutional approval.
  • Bipartsanship: Governors and legislature understand the importance of performance funding and, therefore, depoliticize the issue.

Policy Implications/Recommendations:
  • Policymakers should consider ways to insulate performance funding from the ups and downs of the state revenue cycle.
  • Support from the business community and social justice groups can improve the odds of performance funding succeeding. 
  • Many states that have considered or recently adopted performance funding systems have incorporated equity components that reward colleges for enrolling, educating, and graduating underserved students. 

Research Design:
Qualitative, multiple state case study model, including literature review on demise of performance funding systems and interviews with key policymakers and opinion leaders in four states (e.g., Florida, Missouri, Tennessee, Washington).

93 policymakers, practitioners, and other leaders (e.g., business leaders, researchers, outside consultants) interviewed by authors.

Year data is from:


Data Collection and Analysis:
Three-tier process: a) collection of documentary evidence; b) interviews with elected officials and staff, higher education representatives, and business leaders; and c) follow up contacts to resolve discrepancies in responses.


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