tc columbia

Implementing Performance Funding in Three Leading States: Instruments, Outcomes, Obstacles, and Unintended Impacts

By: Kevin Dougherty, Sosanya Jones, Hana Lahr, Rebecca Natow, Lara Pheatt & Vikash Reddy


This paper summarizes findings from a large study on the implementation and impacts of performance funding in three states that are regarded as leaders in that movement: Indiana, Ohio, and Tennessee. Based on interviews with state officials and with staff at 18 colleges and universities, the authors describe the policy instruments used to implement performance funding, the impact of performance funding on institutional policies and programs, the obstacles institutions encountered in responding to performance funding demands, and the unintended impacts that ensued.

While performance funding spurred institutions to make changes designed to improve student outcomes, it is difficult to gauge the impact of performance funding because it was one of several concurrent initiatives aimed at improving outcomes at the colleges. Interviewees reported several obstacles that hindered institutions’ efforts to respond to performance funding demands, including the composition of their student bodies, inappropriate metrics, and insufficient institutional capacity. Interviewees also frequently reported observed and potential impacts that were not intended by the policy designers, such as restrictions in college admissions and the weakening of academic standards.