This paper summarizes my Ph.D. dissertation research, which
addressed the following questions (among others): What changes
might enhance future performance funding efforts in Colorado?
Did the use of performance funding improve higher education performance
or productivity in Colorado? Is performance funding the most
appropriate vehicle to carry the quality improvement and accountability
banners? My research indicates that much more work needs to be
done to help states more fully understand the many variables
of higher education quality and productivity before they embrace
performance funding. I have summarized recommendations on how
Colorado might improve its performance funding model.
COLORADO AND PERFORMANCE FUNDING
Colorados first attempt at performance funding was legislated
in House Bill (HB) 94-1110, which was funded for only three of
the five years it was in effect. The Colorado Commission on Higher
Education (CCHE) collected data from higher education institutions
and their governing boards during the fiscal years 1994-95 to
1997-98, which they used to make funding allocation decisions.
HB 96-1219, the "Higher Education Quality Assurance Act",
represented the second step toward a quality-enhancing (although
unfunded) budgeting formula for Colorados higher education
sector. Current legislation is embodied in HB 99-1289, which
mandates a two-year study of the "
performance of the
state system of higher education
including the criteria
for measuring achievement of the indicators and the method of
allocating funds as incentives for achievement." Colorado
Senate Bill (SB) 99-229 superseded HB 96-1219 and established
a new set of performance indicators (although some do overlap
with those in HB 96-1219).
Colorados 1999-2000 Performance Indicators
Graduation Rates and Credits for Degree (four-year institutions).
Graduation Rates and Credits for Certificate or Degree (two-year
Faculty Instructional Productivity.
Lower Division Class Size
Approved and Implemented Diversity Plan
Institutional Support Costs
FINDINGS AND RECOMMENDATIONS
Finding: Mis-Directed Performance Funding
Performance funding policy did not require that the higher
education governing boards forward the performance funding amounts
to their respective institutions even though it was the institutional
performance that drove the performance funding allocations. Institutions
and their faculty and staff, who are the true change agents for
many of the performance measures used, were left out of the funding
process. It is likely that the governance structure and the faculty
compensation system in place at most higher education institutions
(including Colorados) impede change in educational practices
in response to performance funding. Faculty are organized into
individual departments, housed within separate schools and colleges.
As states try to use performance funding to influence the behavior
of higher education institutions, they run the risk of sending
confusing and mixed messages to faculty, whose reward systems
do not yet reflect the use of performance indicators.
Establish a mechanism whereby performance funding flows through
the governing boards and institutions and to the schools, colleges,
and department levels where it can directly affect faculty and
Finding: Insufficient Funding Amounts
Colorados performance funding was considerably short
of the 2 5 % of base funding that experts recommend.
The state of Colorado could match the amounts that institutions
shifted from their base budgets. If the state allowed the institutions
three to five years to incrementally allocate a portion of their
base budgets to performance funding and matched that amount with
new funding (within legal restrictions), the state and the institutions
would be partners.
Finding: Discontinuity of the Funding
The Colorado State legislature discontinued the funding for
the performance indicators while the legislation was still in
State legislatures, in concert with governing boards and higher
education leadership, should establish a long-term agenda, complete
with an evaluation timetable, and maintain consistent funding.
Otherwise, performance funding policies will have little effect
and it will be difficult, if not impossible, to measure their
Finding: Discontinuity of the Criteria
The Colorado Commission on Higher Education (CCHE) modified
many of the performance indicators during the period the legislation
was in effect. They made the adjustments in an attempt to achieve
more meaningful results, but made it very difficult to analyze
the results. Without understanding how of if performance funding
affects higher educations performance, policymakers cannot
know whether to continue the policies or how to modify them to
better meet state goals. Faculty and administrators may also
become confused about what the states goals are if the
performance measures are not consistent.
State legislatures should make every attempt to ensure that
coordinating agencies and governing boards make minimal changes
to performance indicators. Of course, there may be need to adjust
how performance data is collected or how performance indicators
Finding: Research Institutions Behave Differently
The three institutions classified by CCHE as "Research
I" universities (Colorado School of Mines, University of
Colorado at Boulder, and Colorado State University) admitted
higher-achieving students (as evidenced by index scores [ACT
plus high school GPA/class standing]), delivered education differently,
and paid significantly higher faculty salaries.
One key measure of learning incorporated in the performance
indicators was students performance on the Graduate Record
Examination (GRE). Statistical analysis indicated that almost
70% of the variation in students GRE scores could be attributed
to students ACT scores. Yet, the states performance
funding model rewarded higher or improving GRE scores equally
for all institutions. Analysis also indicated that research institutions
attracted higher-achieving students (as measured by ACT scores)
thereby allowing those institutions to reap the rewards of the
performance-funding model simply because of the type of students
Structure the performance-funding model so that it distinguishes
between research and non-research institutions.
Reward institutions whose incoming students achieve ACT scores
above a certain level differently for their outgoing students
achievement (GRE, etc.) scores.
Weight performance indicators by their importance to specific
Base performance funding for test scores on improvement from
a pre-specified base level or benchmark.
Finding: No correlation Between Funding and Performance
Statistical analysis indicated no significant relationships
between performance funding dollars allocated and subsequent
higher education performance indicators in Colorado. In other
words, the performance funding had no effect on higher education
performance as measured by the CCHE.