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Outcomes Based Funding and Race
in Higher Education
Tiffany Jones • Sosanya Jones • Kayla C. Elliott • LaToya Russell Owens •
Amanda E. Assalone • Denisa Gándara

Outcomes Based
Funding and Race
in Higher Education
Can Equity be Bought?
Tiffany Jones Sosanya Jones
The Education Trust Southern Illinois
Washington, District of Columbia, University-Carbondale
USA Carbondale, Illinois, USA

Kayla C. Elliott LaToya Russell Owens

Florida Atlantic University Georgia State University
Boca Raton, Florida, USA Atlanta, Georgia, USA

Amanda E. Assalone Denisa Gándara

Southern Education Foundation Southern Methodist University
Atlanta, Georgia, USA Dallas, Texas, USA

ISBN 978-3-319-49435-7 ISBN 978-3-319-49436-4 (eBook)

DOI 10.1007/978-3-319-49436-4
Library of Congress Control Number: 2016961801

© The Editor(s) (if applicable) and The Author(s) 2017

This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights of
translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and
retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology
now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in
this book are believed to be true and accurate at the date of publication. Neither the publisher
nor the authors or the editors give a warranty, express or implied, with respect to the material
contained herein or for any errors or omissions that may have been made. The publisher remains
neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Cover illustration: Cover pattern © Melisa Hasan

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
 CONTENTS

1 Show Me the Outcomes! The Emergence of Performance

and Outcomes-Based Funding in Higher Education 1

PART I Understanding the Impact of POBF on Racial Equity

2 Double or Nothing, States Betting It All on Performance

and Outcomes-Based Funding and the Implications
for Equity 13

3 Reparations and Rewards: Performance and Outcomes-

Based Funding and De Jure to De Facto Segregation
in Higher Education Systems 31

4 Impacting the Whole Community: Two-Year

Minority-Serving Institutions and Performance
and Outcomes-Based Funding in Texas 61

PART II Examining POBF Design, Adoption, & Revision

5 A Critical Analysis of the Sociopolitical Climate for POBF

in Three States 85

v
vi CONTENTS

6 Policy Actors, Advocates, and Critics: The Promotion

and Critique of Performance and Outcomes-Based
Funding’s Impact on Equity 107

7 Between Words and Action: The Problem with POBF

Indictors for Achieving Racial Diversity 123

8 Toward a New Framework for Funding for Equity 145

Index 161
 LIST OF FIGURES

Fig. 4.1 Major Sources of Operating Revenue for Community

Colleges in Texas, FY 2011. Source: Legislative Budget
Board 2013 68
Fig. 4.2 Per-Student Funding for Community Colleges in Texas,
Before Performance Funding (2003–2013) and During
Performance Funding (2014–2015) 71
Fig. 4.3 Total Success Points Funding by Fall Headcount
Enrollment by MSI Designation, 2014 72
Fig. 4.4 Total Success Points by Enrollment by Quartiles
for Proportions of Student Subgroup Enrollments,
FY 2014–2015 75

vii
 LIST OF TABLES

Table 2.1 Ohio Funding Formula 17

Table 2.2 Central State Percentage Change 18
Table 2.3 Tennessee Funding Formula 22
Table 2.4 Tennessee Higher Education Per-student Allocation 24
Table 3.1 Timeline of Critical Desegregation Cases and Other Key
Events Impacting Higher Education for Blacks 39
Table 3.2 2014 Performance Funding Allocations for Florida State
University System Institutions 47
Table 3.3 Florida’s 2014 POBF Metrics and Measurements 49
Table 4.1 Median Per-Student Funding for Public Community/
Junior Colleges from State Appropriations, by MSI
Designation and POBF Operation 70
Table 4.2 Weighted Student Success Points by Total Fall Headcount
Enrollment for Each Metric, by Weight and MSI
Designation, 2014–2015 73
Table 5.1 A Comparative Snapshot of Each State and its Adoption
of POBF Policy 87
Table 6.1 Stakeholder Perspectives on POBF and Equity 111
Table 7.1 Explicit State POBF Indicators and Weights Addressing
Racial Diversity and Equity 131
Table 7.2 State POBF Proxies for Racial Diversity 134

ix
 PART I

Understanding the Impact of POBF

on Racial Equity
 CHAPTER 1

Show Me the Outcomes! The Emergence

of Performance and Outcomes-Based
Funding in Higher Education

Abstract This chapter explains the evolution and characteristics of perfor-

mance and outcomes-based funding (POBF) and why it matters to achiev-
ing equity in higher education. It also describes the research questions,
methods, and theoretical frameworks guiding the book.

Keywords Performance funding
Chapter overview
Outcomes-based

funding

Over the last decade, concerns about the cost and value of college have
saturated the media. Less than 24 hours after HBO aired an episode about
the student loan crisis on its VICE documentary series, presidential candi-
date Hillary Clinton released a proposal to provide student loan forgiveness
to entrepreneurs. Higher education sessions and national education policy
forums are dominated by topics like “how to measure the value of college,”
“college affordability,” and “free community college.” These movements
represent the growing concern over the costs of college, students’ reliance
on student loans to pay for college, and, ultimately, whether or not it is all
worth it.
With less than half of all students in the United States completing a college
degree within six years, and student loan debt reaching $1 trillion, policy-
makers have become entrenched in a movement to hold colleges and uni-
versities more accountable to their supporters. Similar to K-12 accountability,

© The Author(s) 2017 1

T. Jones et al., Outcomes Based Funding and Race in Higher
Education, DOI 10.1007/978-3-319-49436-4_1
2 OUTCOMES BASED FUNDING AND RACE IN HIGHER EDUCATION

officials are pressured to answer questions about student outcomes and

performance, the value of education, the effectiveness of instructors, and the
ability of existing leaders to manage college budgets efficiently and effectively.
States have also taken numerous actions to hold institutions of higher educa-
tion more accountable by adopting performance and outcomes-based fund-
ing (POBF) policies. Through POBF, public colleges and universities receive
state funding through formulas that no longer rely solely on student enroll-
ment, but are instead based on student outcomes. This means that lower
student outcomes such as graduation rates result in less funding for the
college or university.
POBF policies were first introduced to encourage higher education insti-
tutions to focus on issues that governments and voters felt were important,
such as outputs and efficiency (Dougherty et al., 2015). As the costs of higher
education increased in the 1980s and 1990s, so too did the demand for
greater proof that institutions provided a high-quality education and higher
graduation rates. As of 1994, more than one-third of states implemented
POBF policies that provided financial incentives for measures such as provid-
ing access for undergraduate students, sustaining quality in undergraduate
education, creating national competitiveness in graduate studies and research,
meeting critical state needs, and maintaining managerial efficiency and effec-
tiveness (Ruppert, 1994). The 1.0 version of POBF policies allowed states to
provide bonus money for high-performing campuses. However, the eco-
nomic crisis of the new millennium resulted in the reduction of such policies,
as states did not have enough funding to provide incentives to affect institu-
tional behaviors (Burke and Modarresi, 2000; Shulock, 2011). But more
recently, the popularity of POBF policies has reemerged as a result of limited
state resources for higher education and an increased demand for account-
ability for all public spending (McLendon et al., 2006). Instead of making
bonus funding available, the limited resources of POBF 2.0 stipulate that
either some or all of a campus’s base funding must be determined by student
outcomes. So far, over half of all states have adopted a funding formula that
takes student outcomes and institutional performance into account (National
Conference of State Legislatures, 2015).

HOW DOES POBF WORK?

Historically, states determined campus funding based on inputs or student
enrollment; however, POBF policies often consider student inputs, pro-
gress, and outcomes. Within POBF policies, states use input metrics to track
 1 SHOW ME THE OUTCOMES! THE EMERGENCE OF PERFORMANCE . . . 3

and reward campuses that enroll and hire desired student and faculty popula-
tions. For instance, the state of Virginia measures increases in the enrollment
of in-state undergraduate students from underrepresented populations,
including low-income, first-generation, and racial and ethnic minority stu-
dents. Progress metrics includes variables like credit accumulation and reten-
tion that demonstrate colleges’ progress toward degree completion and
other outputs. Progress metrics are paired with process metrics that capture
institutional efforts to increase their capacity in ways that could increase
their institutional effectiveness. For example, in Arkansas, progress is mea-
sured at four-year institutions based on the percentage of students who earn
18 or more credit hours over two academic years. The output metrics
represent states’ goals for public higher education, which most often
means overall degree completion for targeted student populations. For
instance, the state of Nevada rewards campuses based on the number of
bachelor’s degrees conferred during an academic year. States also use POBF
metrics designed to meet state equity and diversity goals by rewarding
campuses for the enrollment and success of students that they have char-
acterized as academically “at risk” or underprepared, including adult, low-
income, underrepresented racial minority, transfer, and first-generation col-
lege students. In Oklahoma, POBF is awarded based on the retention of
Pell Grant recipients and other factors.
Since states use different definitions and metrics to define and measure
performance, models vary considerably across state lines. HCM strategists
(Snyder, 2015) have identified four different types of models to classify the
policies based on their level of sophistication and adherence to promising
practices. HCM’s typology classified Type I systems as those that are rudi-
mentary, do not involve high levels of funding, and represent a minimal
alignment between completion and attainment goals and the state’s finance
policy. Types II and III represent increasing degrees of development and
adherence to promising practices, while Type IV systems are the most robust,
with significant and stable funding, full institutional participation, differentia-
tion of metrics by sector, and prioritization of both degree/credential com-
pletion and outcomes for underrepresented students.

POBF’S SIGNIFICANCE AND IMPACT

States should be cautious in how they design their POBF policies, as
evidence illustrating that the adoption of particular POBF policies leads
to the desired student outcomes remains inconclusive. Scholars who have
4 OUTCOMES BASED FUNDING AND RACE IN HIGHER EDUCATION

studied the impact of these funding formulas have found that some
policies limited or even negatively impacted student outcomes like reten-
tion and graduation rates (Tandberg and Hillman, 2013). In some cases,
policies have even resulted in unexpected outcomes like increased selec-
tivity and increased certificate rather than degree attainment to reach
completion goals at community colleges (Dougherty et al., 2015;
Hillman et al., 2015). What remains is a limited understanding about
the implications of these policies for achieving equity in higher educa-
tion. It is also necessary to consider what POBF policies mean for
students of color–many of whom are first-generation college students
from low-income households–and the colleges and universities that pri-
marily serve these student populations, such as Minority-Serving
Institutions1 (MSIs).
Although the enrollment of students of color in higher education has
increased over time, gaps in completion rates have increased (Eberle-Sudre
et al., 2015). MSIs have fewer resources than non-MSIs, but are responsible
for enrolling two of every five students of color in higher education; in fact,
public MSIs enroll over half of all students of color in public higher educa-
tion (Cunningham et al., 2014; Jones, 2014). As higher education becomes
increasingly stratified, where students attend college, the resources pos-
sessed by those institutions, and the outcomes institutions are able to
achieve all matter. Indeed, such is critical, as students of color and low-
income students are often educated at the least-resourced institutions across
the educational pipeline. Therefore, the approaches policymakers use to
determine resources at colleges and universities that educate large propor-
tions of such students are of the utmost importance. Consequently, the aim
of this book is to examine the implications of POBF for racial equity in
higher education. More specifically, the book will:

1. Discuss how states have addressed equity in their POBF policies, and
the possibilities and limitations of these approaches;
2. Discuss the specific implications and outcomes of POBF for MSIs,
which are most likely to serve the populations who experience
significant inequities in higher education;
3. Provide policymakers and higher education scholars with recom-
mendations and strategies for using POBF to advance racial equity
in higher education; and
4. Encourage communication between those engaged in higher edu-
cation policy and the issues thereof.
 1 SHOW ME THE OUTCOMES! THE EMERGENCE OF PERFORMANCE . . . 5

BOOK OVERVIEW
Theoretical Framing
Educational policy research is often disconnected from the political and
historical contexts that shape the policy being studied (Halpin and
Troyna, 1994). As Bensimon and Bishop (2012) explain, “The scho-
larship and policy frames that are familiar to decision makers and
practitioners too often fail to ask the ‘race’ question critically and
knowledgeably” (p. 2). We sought to address this gap by employing
throughout the book critical frameworks that center issues of race and
inequality, such as intersectionality, Critical Race Theory (CRT), and
Critical Discourse Analysis. We most commonly used CRT, which
challenges assumptions of objectivity and embraces the understanding
that seemingly neutral laws and policies often have consequences and
outcomes that either sustain or exacerbate existing structural and
institutional racial inequities (Bell, 1980; Solorzano and Yasso,
2002). In particular, we applied the CRT tenets of the permanence of
racism and interest convergence to understand the implications of
POBF policies for students who have been historically underrepre-
sented and for the campuses that primarily enroll them.

Methods
The methods used vary across each chapter, but involve either one or more
of the following strategies: (1) a comparative analysis of publicly available
POBF allocations by institutional type (the state allocation data were cre-
ated and made publically available by each state’s respective higher educa-
tion agency); (2) an analysis of publicly available data on state POBF policy
descriptions, which was conducted through a systematic review and evalua-
tion of documents, including print, electronic, and digital media records,
and artifacts for the purpose of uncovering new knowledge (document
analysis supports our goals to employ a critical framework because this
method provides context, highlights gaps, poses questions that need to be
asked, and verifies or corroborates claims) (Creswell and Plano Clark,
2007); (3) the use of publicly available data trends from sources like The
National Center for Education Statistics, which were used to provide demo-
graphic, enrollment, and completion information for the campuses in each
state; and (4) the use of data from semistructured participant interviews
6 OUTCOMES BASED FUNDING AND RACE IN HIGHER EDUCATION

(Olson, 2011) that lasted approximately 1 hour each. Purposeful sampling

(Patton, 1990) was used to select 11 participants, which included higher
education researchers and leaders, and nonprofit and policy organization
leaders, some of whom have been instrumental in POBF design in their
respective states. The group included four participants representing non-
profit organizations engaged with higher education policy and advocacy, six
academic researchers studying higher education accountability systems, and
one participant serving as a campus leader at a public four-year university
that primarily serves low-income students and students of color in a state
with a POBF policy.
In previous studies comparing POBF models in different states, it has
been noted that contextual features may play a role in how a state’s
model is conceived, supported, and implemented (Dougherty et al.,
2015). Furthermore, it should be noted that for each state there is a
unique history of the use and implementation of POBF, which inevitably
may complicate how institutions respond to the model itself and how
subsequent funding cuts impact the institution. We used a purposive
sampling technique (Maxwell, 2005) in order to include states that were
not only employing a POBF system, but were allocating moderate to
high levels (at least 5%) of higher education allocations to the POBF
model. We also wanted states that provided regional diversity and
included a diverse group of higher education institutions, including
two- and four-year MSIs. Within the discussion of national trends, the
book includes in-depth analyses of existing POBF systems in Ohio,
Florida, Tennessee, and Texas, and proposed models in California,
Texas, and Maryland. There are also states like Tennessee that, due to
their long-standing policy and significant state investment in POBF, are
looked to as models for other states’ policy design, thus we focused on
highly influential states such as this one. Additionally, Texas has a POBF
policy that applies to its two-year campuses, including a robust set of
MSIs that will be addressed in Chapter 4. Texas has a separate proposed
policy that, if adopted, would apply to all four-year MSIs in the state. We
include both analyses because the state of Texas has one of the largest
numbers of public MSIs in the nation, and both the adopted policy for
two-year colleges and the proposed policy for four-year institutions have
the potential to significantly impact a large group of students of color.
Detailed descriptions of how states are examined in the chapters are
provided below.
 1 SHOW ME THE OUTCOMES! THE EMERGENCE OF PERFORMANCE . . . 7

Chapter Descriptions
The book begins with three studies examining the impact of POBF on
racial equity in four states. Impact is measured in multiple ways, but each
chapter addresses funding allocations to campuses enrolling students of
color and how equity is rewarded in those systems. The second half of the
book focuses on POBF design in existing and proposed policies, and how
states are attempting to account for and reward racial and other types of
equity. The book also addresses policy influencers’ perspectives on how
POBF impacts equity, and how those perspectives impact policy design
and adoption. Finally, the book closes with recommendations for rede-
signing POBF to advance racial equity.
Chapter 2, “Double or Nothing: States Betting It All on Performance and
Outcomes-Based Funding and the Implications for Equity,” addresses the
effects of POBF measures on four-year MSIs in states that have made
a significant investment in performance-based funding measures. Two states,
Ohio and Tennessee, serve as the focus of this chapter, and their POBF data
are analyzed in depth. In both states, a significant amount of school funding is
dependent on performance measures, with Historically Black Colleges and
Universities (HBCUs) faring seemingly well. Considering these outcomes, it
is imperative to understand how states account for equity in their policy to
ensure MSIs are not disadvantaged. Thus, this chapter gives a detailed over-
view of factors considered in both Ohio’s and Tennessee’s funding formulas,
and how those factors specifically affect MSIs in those states.
In Chapter 3, “Reparations and Rewards: Performance and Outcomes-
Based Funding and De Jure to De Facto Segregation in Higher Education
Systems,” the authors use the case study method to explore POBF policies in
Florida and how they either depart from or extend to the once legally
segregated South. In order to understand the social implications of these
policies, the authors first review the history of HBCUs in the South, discussing
the once legally enforced segregation these institutions experienced, the
desegregation cases that acted as legal interventions to help create equality,
and the de facto segregation that often resulted from those interventions.
Finally, this chapter explores whether the POBF policies and resulting
resource allocations work to support the mission of the desegregation cases,
or if these policies are simply another example of de jure segregation that
ultimately results in separate and unequal institutions of higher education.
Chapter 4, “Impacting the Whole Community: Two-Year Minority-
Serving Institutions and Performance and Outcomes-Based Funding in
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