The outcomes-based funding model is unique because it does not use enrollments to drive state appropriations for public institutions; instead, it focuses on outcomes such as retention and graduation rates and graduates’ wages, among other metrics. Florida based 8.8% of its state university spending on outcomes-based funding this fiscal year, while other states (Mississippi, Nevada, North Dakota, Ohio) spent over half of their higher education budgets using this model. Tennessee budgeted almost 100% of its funds using an outcomes-based formula.
Stateline reports that presently the effects of this funding model are inconclusive. Self-reporting by universities indicates positive effects on student achievement; the University of Tennessee, for example, reports that graduation rates have risen and the university has improved its academic advising in the wake of outcomes-based funding.
Formal studies of the funding model’s effects, however, are hesitant to declare the model a success without additional statistical analysis. Stateline reports that researchers feel they must further “disentangle” performance funding from other factors that affect colleges, such as decisions made by presidents and faculty, requests by accrediting agencies, grants received from foundations or the federal government, and public pressures.
