The Political Origins of Performance Funding 2.0 in Indiana, Ohio, and Tennessee: Theoretical Perspectives and Comparisons With Performance Funding 1.0

A new form of performance funding often called performance funding 2.0 (PF 2.0) represents a major shift in performance funding. Unlike earlier forms of performance funding that took the form of a bonus on top of the base state funding for higher education, PF 2.0 is embedded into the base funding itself. PF 2.0 programs are seen as promising means to significantly improve institutional performance due to the fact that they typically tie a larger portion of state funding to performance indicators than do PF 1.0 programs. Additionally, PF 2.0 programs aim to be more stable than PF 1.0 programs, as PF 2.0 performance indicators are written into the regular state funding formula itself and are not separate programs that can be easily dropped. Using three perspectives within policy theory—the Advocacy Coalition Framework, Policy Entrepreneurship theory, and policy diffusion theory—this paper examines the political forces supporting the enactment of PF 2.0 in three leading states and compares these forces with those involved in the enactment of PF 1.0 performance funding programs.