States Consider Basing College Funding on Graduation Rates

States fund public colleges primarily based on how many students are enrolled. But a number of legislatures are considering policies that would link funding to whether students graduate.

Lawmakers in Ohio appear likely to adopt a plan, introduced this year, that would base 100% of higher education spending on course and degree completion. Indiana is considering a similar but more modest proposal. And in Louisiana, the governor and Legislature have called for plans that tie 25% of higher education funding to student success.

The concept of rewarding institutions that meet certain goals has been around for about 30 years, but the newer proposals focus more on student outcomes and involve more money.

The renewed interest reflects a growing concern that the USA has fallen behind other countries in college completion rates at a time when higher education is more important than ever.

"We as legislatures have been giving higher education a pass on accountability," says Julie Bell of the National Conference of State Legislatures. "With tuition going up … there’s a whole new thinking about productivity."

President Obama, who wants the USA to lead the world in college graduates by 2020, has proposed $2.5 billion over five years to states that seek to boost college completion rates for low-income students. A recent Brookings Institution report urges that half that money target community colleges.

Strategies vary with state priorities, says Brenda Albright, an education consultant in Franklin, Tenn., who studies enrollment-based funding.

  • Ohio and Indiana are targeting degrees in science, technology, engineering and math.
  • Missouri’s department of higher education has proposed a plan to finance schools based on how students in allied health and other fields fare on state licensing exams.
  • Washington state’s board of community and technical colleges plans to reward schools when students cross certain hurdles, such as completing 15 credits and passing math, along the way toward earning a credential.

Some early adopters, such as Florida, have seen results. From 1997 to 2007, Florida’s community-college completion rates shot up 43% while enrollments rose 18%.

Even so, of 26 states that enacted performance funding since 1979, about a dozen, including Illinois and South Carolina, have abandoned it, says researcher Kevin Dougherty of the Community College Research Center at Teachers College, Columbia University.

Albright predicts the new policies will have staying power. Many older policies "were poorly designed and didn’t focus on important state goals," she says. As more states say they want more students to graduate, "it’s a natural progression to fund degrees." (USA Today)

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