Research
States are increasingly using workforce-oriented performance-based funding (PBF) to fund higher education and incentivize colleges and universities to improve students’ post-graduation outcomes. In this study, we use detailed, up-to-date data on workforce-oriented PBF policies in the United States combined with publicly available College Scorecard data to estimate the effect of PBF on students’ debt-to-earnings ratios and loan default rates. We find workforce-oriented PBF has minimal effects on students’ ROI and loan default except at HBCUs, where we find that workforce-oriented PBF had a statistically significant, negative impact on student debt.
Amid rising concerns about the return on investment (ROI) of postsecondary education, an increasing number of states have adopted performance-based funding (PBF) metrics that focus on students’ economic success and completion in high-demand fields, such as STEM and health. States have also increased the share of state funding tied to PBF. In this study, we examine the effects of various PBF policy designs on student completion across different postsecondary credential types and academic fields. Our findings indicate that PBF policies did not have a significant impact on completion for certificates, associate degrees, or bachelor’s degrees across fields of study. These results remained consistent across institution types and students’ racial/ethnic background.
In this working paper, our research team leveraged new data created from thousands of financial documents to explore the different types of local tax sources appropriated to community colleges. While property taxes are the most common local tax source for community colleges, we outline a variety of additional local funding sources for community colleges, local sales tax, gambling tax, hotel tax, tobacco or cigarette tax, alcohol tax, fuel or gas tax, entertainment tax, and more.
We compiled the first longitudinal dataset with detailed state funding information to examine whether different funding strategies for public higher education affect college access and completion, with a focus on outcomes among racially minoritized students. We found no relationships between funding mechanisms and student outcomes at community colleges. However, at public universities, we found that funding strategies with a base-plus component that provide across-the-board increases or decreases to colleges may reinforce already-existing funding inequities. This leads to a system in which racially minoritized students, particularly Black students, face challenges to completing a degree.
State funding for public higher education institutions is crucial in supporting college access and completion, particularly among students from historically underrepresented groups, yet little is known about these mechanisms and how they are affected by financial challenges. This paper provides the first detailed longitudinal typology of state funding strategies, focusing particularly on formula volatility and equity. We find a gradual shift toward funding models that include a combination of base-adjusted and enrollment and performance metrics, along with a growing focus on equity. During recessions, states frequently revert to across-the-board funding cuts, further disadvantaging underresourced institutions.
We compiled the first longitudinal dataset with detailed state funding information to examine whether different funding strategies for public higher education correlate with college access and completion, with a focus on outcomes among racially minoritized students. We found no relationships between funding mechanisms and student outcomes at public universities. However, at community colleges, we found that funding strategies that combine base adjustments and enrollment or performance components may increase enrollment but not completions.
Policy Briefs
This policy brief examines the prevalence and design of state-level equalization policies aimed at reducing funding disparities between public community colleges within states across the U.S. We reviewed publicly available legislative documents and government sources covering fiscal years 2017–2024 to catalog which states had equalization policies and what factors were used for equalization. We show that 22 states had some form of equalization policy during this period, with 19 accounting for non-local factors like rurality or enrollment size and 10 accounting for local factors like property taxes or economic conditions. While these policies are increasingly prevalent, little is known about them and their impact on institution and student outcomes.
Performance-based funding (PBF), which links state appropriations for public colleges to student outcomes, continues to be adopted and used despite evidence that it does not improve student outcomes. A primary argument for adoption is that states can leverage PBF to expand accountability when increasing funds to public colleges. But we know little regarding whether PBF is associated with measurable changes in state appropriations. Drawing on up-to-date PBF data, we ask: To what extent does PBF adoption increase state appropriations for public colleges? We do not find consistent evidence that PBF increases state appropriations to public four-year or community colleges. Although PBF is sometimes used to argue for increased state funding, this brief demonstrates these funds do not consistently materialize.
In this policy brief, our research team leveraged new data created from thousands of financial documents to explore the different types of local tax sources appropriated to community colleges. While property taxes are the most common local tax source for community colleges, we outline a variety of additional local funding sources for community colleges, local sales tax, gambling tax, hotel tax, tobacco or cigarette tax, alcohol tax, fuel or gas tax, entertainment tax, and more.
In this brief, we examined how state-level financial aid policies relate to students’ enrollment and completion using detailed data on states’ financial aid programs available for first-time entering college students for fiscal years 2004-2020. We found little consistent evidence of a relationship between student outcomes and the amount of aid per recipient, though, we did find practically significant correlations with aid eligibility criteria. Among institutions located in states with aid disbursed based on financial need and academic merit, requiring a college entrance exam for eligibility was associated with smaller enrollments and lower graduation rates compared to institutions that did not require the exams. This finding was not replicated when we explored requiring exams for institutions in states with aid disbursed solely based on academic merit.
We compiled the first longitudinal dataset with detailed funding information to help us examine whether different funding strategies affect college access and completion, with a focus on outcomes among racially minoritized students. We found no relationships between funding mechanisms and student outcomes at community colleges. However, at public universities, we found that funding strategies with a base-plus component may bake in already-existing funding inequities. This leads to a system in which racially minoritized students, particularly Black students, face challenges when seeking to complete a degree.
This brief offers a detailed overview of how states and higher education systems allocate funding to public colleges and universities and how funding mechanisms have changed over time. We find growth in the number of “hybrid” funding models that incorporate enrollment, performance, and/or prior year allocation (base+) considerations in both the two- and four-year sectors. At the same time, funding formulas with a student enrollment component remained the predominant funding mechanism in the two-year sector. We find a decreasing number of four-year systems with funding provisions aimed at improving the research capacity of institutions since the Great Recession. We see a steady number of two- and four-year sectors that include provisions that seek to provide more equitable funding for institutions based on the institution’s characteristics or the characteristics of students enrolled at the institution.
In this brief, we explore the relationship between community colleges’ reliance on local funding and their total institutional revenue. We find that community colleges’ level of reliance on local funding is negatively related to their total institutional revenue for rural community colleges and community colleges serving an above-average share of low-income students.
As outstanding student loan debt has increased, institutions and states have taken steps to try to reduce student debt. At the same time, how states fund public higher education could affect the amount of debt that students have upon leaving college and whether they are able to repay their loans. In this brief, we provide the first examination of whether state performance-based funding policies affect student loan debt. We find no increases in debt among students who completed college, but students who left a college subject to performance funding without graduating had higher debt burdens than students attending non-performance funding institutions.