Pennsylvania appears poised to be the next state to adopt performance-based funding for its higher education institutions. In preparation for the unveiling of his budget proposal next month, Pennsylvania governor Josh Shapiro floated his plan to consolidate the remaining Pennsylvania State System of Higher Education (PASSHE) schools and establish a consolidated statewide community college system.
The plan also includes caps on tuition increases for Pennsylvania residents whose household incomes fall below $70,000 per year. The plan has received positive interest from both Democrats and Republicans, as well as some higher education institutions that stand to benefit from a performance-based funding approach.
Currently, Pennsylvania budgets less per student than any other state except New Hampshire. With low state funding, colleges and universities make up the shortfall by raising student tuition, fees, and room-and-board costs. While tuition there has technically been frozen for the last five years, increases in other cost areas mean that tuition accounts for only about one-third of a student’s average annual attendance costs.
According to Shapiro, consolidation of the 10 remaining PASSHE schools and the consolidation of the state’s 15 community colleges will produce more efficient higher education spending. The plan could result in program cuts at some schools to eliminate duplication and would require a high degree of coordination among the campuses. Additionally, the plan could eliminate duplicate services by providing a more centralized administration.
The plan also calls for the institution of performance-based funding, which would reward state funded schools for achieving certain outcomes. If adopted, the plan would also change the current approval process, which currently requires a super-majority in both the Pennsylvania House and Senate. That requirement has delayed higher education funding several times as approval votes have been delayed along party lines.
Performance-based funding is inherently unequal
The problem with performance-based funding is that certain higher education institutions perform quite well for reasons unrelated to the institution’s state funding. For example, Penn State University is the largest university in the state and has an enrollment of about 90,000 students on 54 campuses. Penn State University is currently the third-largest research university in the United States, with an annual research volume of about $1.8B. It has an acceptance rate of about 55% and a graduation rate of nearly 75%.
Penn State’s size and its ability to vacuum up even marginally prepared applicants around the state makes it harder for other post-secondary institutions to compete for a limited number of students, which in turn, limits their state funding. Because Penn State relies less on the Pennsylvania legislature for funding but still generates a lot of external revenue, it can offer students relatively affordable services and programs that other institutions cannot.
Pennsylvania’s community colleges must compete for students in this environment and largely without the benefit of research dollars. The official graduation rate for the Community College of Allegheny County, which serves Pittsburgh, is 18%. On paper, that appears to be a poor use of state funding. After all, where should the state’s limited higher education dollars be spent: on the school that graduates 3 out of 4 students, or the school that graduates 1 out of five students?
Unfortunately – for community colleges – more states are seeing the logic in moving to a performance-based funding model for higher education. Return-on-investment is a very easy concept to understand; it is even easier to misapply it to state functions like higher education funding.
Just don’t be surprised when Michigan legislators start laying the groundwork for a performance-based funding agenda for higher education.
Photo Credit: Philippe_ , via Flickr
