After first appearing in 1979 in Tennessee, performance funding for higher education went on to be adopted by another 26 states. This monograph reviews research on a multitude of states to address these questions: • What impacts does performance funding have on institutional practices and, ultimately, student outcomes? • What obstacles and unintended effects do performance funding encounter? This monograph finds considerable impacts on institutional practices, weak impacts on student outcomes, substantial obstacles, and sizable unintended impacts. Given this, the monograph closes with a discussion of the implications for future research and for public policymaking on performance funding. This is the 2nd issue of the 39th volume of the Jossey-Bass series ASHE Higher Education Report. Each monograph is the definitive analysis of a tough higher education issue, based on thorough research of pertinent literature and institutional experiences. Topics are identified by a national survey. Noted practitioners and scholars are then commissioned to write the reports, with experts providing critical reviews of each manuscript before publication.

Table of Contents:
Executive Summary ix Foreword xiii Acknowledgments xv Introduction 1 Performance Funding: Nature and Forms 5 Performance Funding versus Performance Budgeting and Reporting 5 Performance Funding 1.0 and 2.0 6 Types of Performance Indicators: Ultimate and Intermediate Student Outcomes 7 Conceptual Framework and Research Methods 9 Conceptualizing the Impacts of Performance Funding 9 Data Search 13 Data Analysis 14 Limitations 15 Description of State Performance Funding Programs 17 Which States Have Had Performance Funding Programs? 17 Florida’s Two Performance Funding Programs 19 Missouri’s Funding for Results Program 23 North Carolina’s Program for Community Colleges 24 Ohio’s Old and New Performance Funding Programs 25 Pennsylvania’s PF 2.0 Program 27 South Carolina’s Early PF 2.0 Program 28 Tennessee’s Old and New Performance Funding Programs 30 Washington’s Two Programs: One Abandoned, One Added Later 32 Policy Instruments and Their Immediate Institutional Impacts 35 Changing Funding Incentives 35 Increasing Awareness of State Priorities 37 Increasing Awareness of Institution’s Own Performance 39 Increasing Status Competition among Institutions 40 Building Capacity for Organizational Learning 41 Intermediate Institutional Impacts 45 Alterations to Academic Policies, Programs, and Practices 45 Changes in Developmental Education and Tutoring 48 Alterations to Student Service Policies, Programs, and Practices 49 Intended Student Outcomes 53 Graduation Numbers and Rates 53 Retention Rates 56 Remedial Education Completion Rates 56 Obstacles to the Effectiveness of Performance Funding 57 Inappropriate Performance Funding Measures 58 Instability in Performance Funding Levels, Indicators, and Measures 61 The Brief Duration of Many PF Programs 62 Inadequate State Funding of Performance Funding 63 Shortfalls in Regular State Funding 63 Uneven Knowledge about Performance Funding Within Colleges 64 Inequality of Institutional Capacity 67 Institutional Resistance to and Gaming of the System 68 Unintended Impacts of Performance Funding 71 Costs of Compliance 71 Narrowing of Institutional Missions 72 Grade Inflation and Weakening of Academic Standards 73 Restrictions of Student Admissions 75 Diminished Faculty Voice in Academic Governance 76 Summary and Conclusions 79 Main Findings 79 Research Implications 80 Implications for Practice 82 Concluding Thoughts 90 Appendix 91 Table A1: Data Analysis Categories: Number of Studies Where They Appear 91 Table A2: Multivariate Analyses of Impacts of Performance Funding on Graduation and Retention Numbers and Rates 96 Notes 103 References 109 References for Individual States 121 Name Index 125 Subject Index 128 About the Authors 133