Performance funding, a leading example of neoliberal policy making, involves funding institutions not on enrollments but on outcomes such as graduation. This article examines intended and unintended impacts of performance funding and obstacles to making it work effectively. It includes policy recommendations to help institutions better respond to performance funding

Dougherty, Kevin J.

Natow, Rebecca S.

Boston College: Open Journal Systems

I N T E R N A T I O N A L  H I G H E R  E D U C A T I O N 7they	are	well	established	in	the	labor	market.	The	solution,	already	adopted	by	many	countries,	including	England	and	Australia,	 is	 a	 well-designed	 universal	 income-contingent	loan	repayment	system.	Human	 capital	 development	 among	 undergraduates	is	a	serious	problem.	Apart	 from	a	motivated	minority	of	10–15	 percent,	 US	 undergraduate	 students	 are	 not	 learn-ing	 as	 much	 as	 they	 could.	 The	 onus	 for	 change	 is	 on	faculty	 members	 and	 administrators.	 States	 could	 trade	off	 additional	 funding	 for	 conscientious	 efforts	 to	 profes-sionalize	college	teaching.	Thanks	to	cognitive	science	and	thousands	of	well-designed	learning	studies,	 the	basics	of	effective	college-level	 instruction	are	now	well	known.	In-struments	such	as	the	Weiman–Gilbert	Teaching	Practices	Inventory	allow	instructors	to	rate	themselves	on	practices	that	the	sciences	of	learning	have	shown	to	be	valuable	for	student	comprehension	and	mastery	of	subject	matter.	Ac-countability	measures	such	as	online	reading	quizzes	prior	to	class	meetings	also	make	a	difference.The	mass	employment	of	poorly	paid	and	often	poorly	prepared	part-time	instructors	is	a	major	drawback	in	the	current	US	system.	Research	evidence	indicates	that	these	people	 tend	 to	 be	 less	 effective	 instructors,	 and	 that	 on	many	university	 campuses	 their	work	conditions	and	pay	are	 deplorable.	 More	 institutions	 could	 follow	 the	 lead	 of	the	 University	 of	 California	 by	 replacing	 these	 positions	with	 permanent	 lecturers	 with	 security	 of	 employment,	based	on	rigorous	evaluation	of	candidates’	teaching	com-petence	and	knowledge	of	 the	 literature	on	effective	prac-tices	in	college	teaching.	Performance	Funding	as	Neoliberal	PolicyRebecca S. Natow and Kevin J. DoughertyRebecca S. Natow is assistant professor of education policy at Hofstra University, New York, US. Kevin J. Dougherty is professor of higher edu-cation and education policy at Teachers College, Columbia University, US. E-mails: Rebecca.S.Natow@hofstra.edu and dougherty@tc.edu. This article is based on the report Analyzing	Neoliberalism	in	Theory	and	Practice:	The	Case	of	Performance-Based	Fund-ing	 for	 Higher	 Education	 (Centre for Global Higher Educa-tion, UCL Institute of Education, 2019), available from: https://www.researchcghe.org/publications/working-paper/ana-lysing-neoliberalism-in-theory-and-practice-the-case-of-perfor-mance-based-funding-for-higher-education.Neoliberal	 ideas—whether	 new	 public	 management	(NPM),	 principal-agent	 theory	 (or	 agency	 theory),	 or	performance	management—have	provided	the	rationale	for	sweeping	policy	reforms	in	the	governance	and	operation	of	higher	education.	One	such	policy	is	performance-based	funding	 for	 higher	 education,	 which	 has	 been	 widely	 ad-opted	in	the	United	States,	Europe,	and	elsewhere.	Around	35	US	states	now	provide	performance-based	 funding	 for	higher	 education,	 in	 which	 some	 portion	 of	 government	funding	for	public	higher	education	is	based	not	on	enroll-ments	and	previous	funding	levels,	but	instead	on	institu-tional	performance	reflecting	student	outcomes	measures	such	as	persistence,	degree	completion,	and	job	placement.	Performance-based	funding	is	also	quite	common	outside	the	United	States.	Australia,	Canada,	and	many	European	countries	(19	as	of	2010)	fund	their	higher	education	sys-tems	based	on	output-related	criteria	such	as	degrees	pro-duced,	credits	earned,	and	research	effort	and	quality.	Two	 kinds	 of	 performance-based	 funding	 programs	can	be	distinguished.	Performance	funding	1.0	provides	a	bonus	above	regular	government	funding	for	higher	educa-tion	and	is	often	no	greater	than	1	to	5	percent	of	total	gov-ernment	funding.	Performance	funding	2.0	is	not	provided	in	 the	 form	of	 a	bonus	but	 instead	 is	part	 of	 the	govern-ment’s	base	funding	for	public	institutions	of	higher	edu-cation.	The	proportion	of	government	funding	tied	to	per-formance	in	2.0	programs	is	often	much	higher	than	in	1.0	programs,	and	may	be	up	to	80–90	percent	of	government	funding.	With	other	institutional	revenues	such	as	tuition,	fees,	and	research	grants	taken	into	account,	performance	funding	2.0	can	amount	to	a	quarter	of	a	US	public	institu-tion’s	total	revenues.Intended ImpactsThe	champions	of	performance-based	funding	aim	to	real-ize	outcomes	such	as	higher	graduation	rates	and	improved	research	productivity	by	changing	the	values	and	incentives	of	 higher	 education	 institutions	 and,	 in	 turn,	 their	 orga-nizational	 practices.	 Indeed,	 performance	 funding	 in	 the	United	 States	 and	 Europe	 has	 influenced	 institutions	 to	make	changes	to	 their	policies	and	programs	for	 the	pur-pose	 of	 improving	 student	 outcomes.	 These	 include,	 for	example,	 redesigning	 their	 academic	 programming	 and	teaching	 practices	 and	 reforming	 their	 student	 advising	and	tutoring	services.	However,	 the	 impacts	 of	 performance-based	 funding	on	student	outcomes	are	often	weak.	For	example,	US	per-formance	funding	has	resulted	in	more	students	receiving	Number 98:  Summer 2019I N T E R N A T I O N A L  H I G H E R  E D U C A T I O N8certificates	from	programs	of	a	year	or	 less	 in	 length,	but	it	has	had	very	little	impact	on	baccalaureate	and	associate	degree	 reception.	 Performance	 funding	 for	 higher	 educa-tion	outside	the	United	States	has	likewise	not	evidenced	a	significant	impact	on	student	completion.With	regard	to	the	impact	of	performance-based	fund-ing	on	research	productivity,	the	evidence	is	positive	but	not	conclusive.	There	is	evidence	that	performance	funding	in	Europe	 is	 associated	with	higher	 rates	of	 faculty	 research	productivity.	However,	many	of	these	findings	come	from	studies	that	do	not	rely	on	research	designs	that	adequately	control	 for	 causes	 other	 than	 the	 advent	 of	 performance	funding.ObstaclesThe	limited	impact	of	performance-based	funding	on	stu-dent	outcomes	may	be	due	 in	part	 to	obstacles	 that	 insti-tutions	 encounter	 when	 attempting	 to	 respond	 to	 perfor-mance	 demands.	 US	 government	 officials	 and	 higher	education	personnel	have	discussed	a	number	of	obstacles	that	 hinder	 their	 ability	 to	 respond	 effectively	 to	 perfor-mance	funding	requirements:	many	incoming	students	ar-riving	in	higher	education	lacking	college	readiness;	perfor-mance	funding	metrics	that	do	not	align	with	institutional	missions	 and	 student-body	 composition,	 which	 can	 vary	greatly	across	institutions;	and	insufficient	institutional	ca-pacity	and	resources	to	respond	effectively	to	performance	funding.	 The	 obstacles	 related	 to	 capacity	 and	 resources	are	due	at	least	in	part	to	inadequate	government	effort	to	build	 higher	 education	 institutions’	 capacities	 to	 analyze	their	own	performance,	identify	deficiencies	in	that	perfor-mance,	 determine	 appropriate	 organizational	 responses,	allocate	 resources	 for	 implementing	 those	 organizational	responses,	and	evaluate	how	well	those	responses	worked.Unintended ImpactsAs	with	any	policy	 intervention,	while	policy	makers	pur-sue	 certain	 objectives	 when	 adopting	 performance	 fund-ing,	 there	 are	 also	 likely	 to	 be	 unintended	 consequences.	Indeed,	government	officials	and	institutional	staff	often	re-port	impacts	of	performance	funding	that	were	not	intend-ed	by	policy	designers.	The	fact	that	institutions	are	funded	at	least	in	part	on	student	outcomes	raises	the	prospect	that	institutions	may	resort	to	illegitimate	methods	if	they	face	both	strong	pressure	to	perform	well	on	outcomes	metrics	and	major	obstacles	to	producing	such	performance.	Those	most	 frequently	 cited	 are	 institutions	 restricting	 their	 ad-mission	of	less	prepared	students	and	lowering	their	grad-ing	standards	and	graduation	demands	in	order	to	increase	their	program	completion	rates.Policy ImplicationsAs	discussed	in	our	working	paper,	governments	should	act	to	address	the	negative	impacts	of	performance-based	fund-ing.	Governments	should	protect	academic	standards	and	counteract	the	temptation	to	restrict	admission	of	less	pre-pared	 and	 less	 advantaged	 students.	 Academic	 standards	may	 be	 monitored	 through	 learning-outcomes	 assess-ments,	mandatory	reporting	of	changes	in	grade	distribu-tions	and	degree	requirements,	and	anonymous	surveys	of	faculty	as	to	whether	they	feel	pressured	to	lower	academic	standards.	 Governments	 can	 also	 incentivize	 the	 enroll-ment	and	graduation	of	disadvantaged	students	by	includ-ing	metrics	for	their	access	and	success	and	by	taking	ac-count	of	institutional	missions	and	student	demographics	when	assessing	a	particular	institution’s	student	outcomes.	Governments	 should	 also	 endeavor	 to	 overcome	 the	 bar-riers	 to	 effective	 institutional	 responses	 to	 performance-based	funding,	which	may	prompt	institutions	to	resort	to	illegitimate	means.	To	do	this,	governments	can	provide	ex-tra	funding	to	higher	education	institutions	with	many	dis-advantaged	students	and	help	institutions	to	improve	their	capacity	to	devise	and	implement	changes	that	respond	ef-fectively	to	performance	accountability	requirements.			Free	Tuition	in	Chile:	A		Policy	in	Foster	CareAndrés BernasconiAndrés Bernasconi is professor of education at the Pontificia Universi-dad Católica de Chile, and director of the Center for Advanced Studies on Educational Justice (CJE). E-mail: abernasconi@uc.cl.Four	 years	 into	 its	 implementation,	 nobody	 in	 Chile	seems	 to	 want	 to	 “own”	 the	 free	 tuition	 policy	 insti-tuted	in	2016.	This	is	surprising,	for	the	most	universally	acknowledged	virtue	of	 the	 idea	of	free	tuition	is	 its	over-Number 98:  Summer 2019Two kinds of performance-based fund-ing programs can be distinguished. 

Performance Funding as Neoliberal Policy

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