California’s Performance-Based Funding Aims to Augment Student Success

June 28, 2018

By Jack Porter, Advocacy Associate 

States have long mulled over innovative options to pivot away from allocating taxpayer dollars to institutions based on a formula that only considers enrollment figures or past funding levels. Commonly referred to as performance-based funding, this concept is included in NCAN’s Model State Policy Agenda, and has proven attractive to policymakers aiming to develop an approach that rewards institutions for productivity.

Recent developments open the door for NCAN members in approximately two-thirds of states with a performance-based funding formula to ensure that the policy is augmenting student success, as the several types of formulas in place across the country have not produced exclusively positive outcomes.

The latest instance of the practice coming to fruition emanated this month in California, where Democratic Gov. Jerry Brown signed off on the state’s 2018-19 budget, which included a performance-based funding formula for the state’s 114 community colleges. Forty percent of the $7.4 billion awarded to California’s community colleges will eventually depend on admissions practices and student outcomes.

On one front, 20 percent of state funding awarded to institutions will hinge on the rate at which their students meet certain metrics like completing a degree or certificate, successfully transferring to a four-year institution, or obtaining a well-paying job. Another fifth of funding will be contingent upon the percentage of low-income students enrolled.

NCAN member and advocacy grantee the Southern California College Access Network (SoCal CAN) signed a letter of support to key state legislators last month as the policy was in the final stages of debate.

Along with 32 other California advocacy groups, SoCalCAN contended that the current enrollment-based funding formula fails to incentivize institutions to prioritize student success and close equity gaps. The coalition expressed its firm approval of the proposed performance-based funding formula.

“The revised and strengthened funding formula is much improved, reflecting recommendations from our organizations that the proposal must ensure that low-income and other underrepresented students are prioritized in a funding formula and in student success metrics,” the letter says.

A common point of criticism for performance-based funding is that it will result in institutions becoming more selective in their admissions process as a means to produce better student outcomes, a point the Academic Senate for California Community Colleges raised in a letter of opposition to state lawmakers. In theory, however, this concern will be nullified by California’s incentive to enroll students who are low-income and therefore historically less likely to complete.

The new policy marks “a historic moment for our students and our state,” SoCalCAN Executive Director Alison De Lucca says.

“As equity advocates dedicated to increasing the rate of low-income students earning a college degree, we look forward to working with our state leaders to ensure successful implementation of this new community college funding formula,” she said.

The substantive weight placed on success metrics and low-income student enrollment in California’s plan subject it to thoughtful deliberation in the short-term, and make it prime for stakeholder analysis in the long-term. This performance-based model — the first of its kind to designate such a significant percentage of funding solely for this sector — could function as a framework for other states seeking to incentivize two-year institutions to enroll more low-income students and serve them well.

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