Abstract:
Increasing the effectiveness of higher education institutions has become increasingly important for states in recent decades. During this time, a wide range of performance-based higher education funding initiatives has emerged as a means to improve outcomes in higher education. However, although performance-based funding initiatives continue to take shape in a number of states, only a few studies have evaluated the effectiveness of these policies over time. The purpose of this study is to examine the effectiveness of performance funding implementation in United States (U.S.) public four- year institutions, by evaluating the relationship between funding amount and program duration with outcomes represented by completion rates and retention rates.
This study employs hierarchical linear regression (HLM) methods to evaluate
2,452 four-year public institutions in 50 states from 2004 to 2010, using publicly available data obtained from the Integrated Postsecondary Education Data System (IPEDS) longitudinal Delta Cost Project Database. Additional institution-level control variables are also included from IPEDS data, and state-level control variables are incorporated from the National Conference of State Legislatures [NCSL] (2013), Bureau of Labor Statistics [BLS] (2013) and Bureau of Economic Analysis [BEA] (2013)
datasets.
The results of this study’s analyses reveal that neither funding amount nor
duration was meaningfully associated with completion rate or retention rate from 2004 to
2010. The institution-level variable faculty-student ratio was found to have a moderately
significant association with completion rate, however. An examination of variance at
each level of the model showed that the addition of institution-level factors accounted for
the greatest proportion of variance reduction.
This study recommends that further research should be conducted in order to evaluate individual state-level funding models more thoroughly. In addition, state higher education boards and institutional administrators should clarify funding objectives and outcomes measures in order to improve existing models and enhance the alignment between funding formulae and institutional mission. It is also recommended that states should be willing to revise or cease performance-based funding policies when research reveals implementation to be ineffective. Furthermore, the study recommends that institutional administrators, faculty, and staff give greater attention to the implementation and communication of performance funding policies at the institutional level.