Dive Brief:

• All public universities in Florida will now be eligible for performance-based funding, after the state's Board of Governors last week approved a plan to stop a practice denying such funds to the three lowest-performing public colleges.
• The board determined the model no longer served its purpose and that colleges' scores had been improving, the Tallahassee Democrat reported. The decision helps smaller institutions like Florida A&M University, which has seen year-over-year improvement in student outcomes.
• However, colleges must still receive a score of 51 points or more in order to receive institutional investment.

Dive Insight:

More than two-thirds of states currently or plan to tie some form of higher education funding to student outcomes like degree completion and graduation rates, according to New America, a nonprofit public policy think tank. The growth of performance-based funding is in part an outcome of lower and more targeted state investment in higher education. California is among the latest with a plan finalized this past summer to incorporate performance-based funding as a share of state dollars for the California Community Colleges system.

Florida's performance-based funding model weighs retention rates, completion rates, job placement and continuing education rates and entry-level wages, with the State Board of Education setting and evaluating benchmarks and requirements for colleges to receive the funds.

Performance-based funding plans typically reflect a state's educational and workforce goals, though interest in these models and their popularity has shifted over time. New America notes some states funnel all appropriations through a performance-based funding model whereas others issue set amounts or, the most popular approach, a percentage of overall funding.

However, research has pointed out potential shortcomings of performance-based funding programs, including pushing short-term certificates rather than degrees and weakening academic standards. Other studies have shown that minority-serving institutions do no benefit from the model, though some experts say that when designed correctly they can reward colleges for supporting opportunities for low-income and minority students.

States considering performance-based funding are advised to evaluate the needs of the institutions and their students when determining whether and how to implement such a model — such as ensuring they cater to low-income, first-generation and minority students.

California's new model, for example, is a phased-in plan that starts by providing 70% of funding based on enrollment, 20% based on enrollment of low-income students, specifically, and 10% based on performance outcomes. That plan shifts over three years to 60% enrollment, 20% low-income enrollment and 20% performance outcomes.