HIGHER EDUCATION | A New Subject: Performance-Based Funding

Lawmakers, policymakers, and higher education leaders are busy studying an important new subject as Kentucky joins a growing list of states working to tie funding formulas to college and university performance and student outcomes as a lever for improvement.

Students move between classes at the University of Kentucky in Lexington as the academic year began this fall.

Students move between classes at the University of Kentucky in Lexington as the academic year began this fall.

The 2016 legislature mandated that starting in 2018, 5 per-cent of operating appropriations to public colleges and universities be based on a new performance-based funding model. To reach that target, a working group of legislative leaders and higher education officials was asked to make recommendations by this December.

That deadline has intensified study and discussion of performance funding and other states’ experience in the relatively new reform.

“The interest is very strong given the amount of dollars at stake and the immediacy of the policy decision,” said Perry Papka, senior policy director for the Prichard Committee. “Building familiarity and focus is important.”

In late June, the Prichard Committee and Kentucky Chamber of Commerce held a symposium featuring national and state experts to begin to identify and discuss issues, challenges, and approaches on how a shift in funding can steer action toward state and institutional priorities.

At this point, 38 states are developing or implementing some type of performance funding mechanism to deliver part of state funding to colleges and universities. Among the lures of the programs are clarifying higher education goals, making more effective use of data in planning, improving systems that help more students complete degrees, and building public confidence around the state’s investment in postsecondary programs. Finding the right measures, weights, and recognizing ways to avoid unintended consequences is the challenge.

The performance emphasis arrives at a time when colleges — and college students — feel pinched by finances.

In Kentucky, state general fund appropriations to higher education have dropped 16 percent between fiscal 2008 and fiscal 2016. Over the same time, tuition has risen significantly while student loan debt has also increased both in terms of the number of students who owe money after graduation and the amount of debt they carry.

Getting more out of the higher education dollar is a clear priority for states, colleges, parents and students.


The June symposium looked at fundamental steps in moving forward on performance-based funding. Speakers highlighted the importance of design principles — how planning will occur, maintaining strong lines of communication, making priorities clear, ensuring smooth implementation and more. Setting performance measures will involve defining and finding the best ways to measure student progression, completion, how an institution’s mission is met among other considerations.

Other key factors that will influence upcoming discussions include how to ensure access for all students, build collaboration between colleges in the new environment, and assure quality of student learning and experience.

Pages from Performance Based Funding 2016

A new report explores the basics of performance funding.

Panelists noted that variations among states is already a feature of early performance-funding work.

Kentucky panelists noted interest in the approach. Robert L. King, president of the Council on Post-secondary Education, said colleges proposed tying some new state funding to performance in recent years but lawmakers did not latch on to the program until this year.

King said that it will  take time to build effective measures of quality and student learning.

Panelists from Tennessee, which began work on performance funding in 2010, explained their work and eventual system, which was phased in over three years and is now reviewed annually.

Other panelists said that work on the system is likely to turn up data that may be needed but is not currently collected and will open important discussions on topics like how to best measure the success of non-traditional students or how to look at student debt within the overall picture of what colleges deliver.

The symposium is summarized in the report from the Prichard Committee and Kentucky Chamber of Commerce, “Performance & Outcomes-Based Funding: Lessons for Postsecondary Progress in Kentucky,” pictured here.


In June, the Prichard Committee released a framework defining its goals for resuming advocacy work in the postsecondary realm — a return to an area that defined the group’s earliest work in the 1980s before turning to a focus on elementary and secondary education.

“It’s critical to ensure our entire education system presents a seamless web of opportunity for all Kentuckians,” said Brigitte Blom Ramsey, executive director of the Prichard Committee. “Renewing focus on access to affordable, high-quality postsecondary education will support efforts to ensure Kentucky has an educated citizenry and talented workforce.”

The Prichard Committee will focus its attention on issues of access, affordability and quality and encouraging parents, students, business and community leaders, institutions and policymakers to work toward a strong higher education system.

The document describing the group’s priorities is “The Pursuit of Excellence: Principles to Guide Kentucky’s Future Postsecondary Success.” Find out more at www.prichardcommittee.org.

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