The Demise of Higher Education Performance Funding Systems in Three States

Performance funding in higher education ties state funding directly to institutional performance on specific indicators, such as rates of retention, graduation, and job placement. One of the great puzzles about performance funding is that it has been both popular and unstable. Between 1979 and 2007, 26 states enacted it, but 14 of those states later dropped it (though two recently reestablished it). To shed light on the causes of this unstable institutionalization of performance funding, we examined three states that have experienced different forms of program cessation—Illinois, Washington, and Florida. For our analysis of the factors leading these three states to abandon performance funding systems, we drew upon interviews and documentary analyses that we conducted in these states. Our interviews were with state and local higher education officials, legislators and staff, governors and their advisors, and business leaders. The documents we analyzed included state government legislation, policy declarations and reports, newspaper accounts, and analyses by other investigators. We inevitably found that factors unique to one or another state played a role in the demise of performance funding. Nonetheless, we also found several common features: A sharp drop in higher education funding (present in Florida and Illinois); A lack of support by higher education institutions for the continuation of performance funding (all three states); The loss of key supporters of performance funding (all three states); Weak support by the business community (Florida and Illinois); and The establishment of performance funding through a budget proviso rather than a statute (Illinois and Washington). The final section of this paper discusses the implications of these findings for advocates of performance funding