Bevin’s flawed performance funding

John MuenzbergJohn Muenzberg

Column by John Muenzberg, Lecturer of philosophy

What may be even more problematic than the monetary cuts in Gov. Matt Bevin’s budget proposal is his proposed shift to performance funding.

Performance funding involves tying some of the state contribution to performance metrics. One common and largely uncontroversial version involves increased funding for increased enrollment. More involved models award funds based on graduation rates, student retention, types of majors and even job placement rates.

The most alarming problem with performance funding in general is that studies have not proved that they actually work. The Community College Resource Center reviewed more than 40 studies of performance funding and concluded that “the research literature does not provide firm evidence that performance funding significantly increases rates of remedial completion, retention and graduation.”

Unfortunately, Bevin’s proposal has three specific differences that make comparisons moot. Unlike the performance models in most other states, Bevin’s proposal includes a decrease in funding will eventually cover 100 percent of the state funding, and currently does not have specific metrics attached to the bill.

The first problem is that Bevin is proposing performance funding concurrent with general funding cuts. The problem is simple: enacting changes to an institution requires money. If Murray State determines that increasing graduation rates requires hiring more academic advisers, then they need the money to hire more academic advisers. But if our funding is also being cut, then either the advisers will not be hired or even more programs will have to be cut to find the money. It is irresponsible for Gov. Bevin to demand institutional changes while simultaneously cutting the funds necessary to make the changes.

The second problem is that Bevin wants 100 percent of the state contribution to be tied to performance. Most states tie 5-20 percent to performance because they want to incentivize the universities without doing harm to the institutions. Universities have basic operating costs, such as utilities, upkeep and repair, that need to be covered regardless of student enrollment. Of necessity, these costs are planned years into the future. Large swings in this funding could result in institutional neglect or decay. If we were a private university, we might have an endowment of hundreds of millions of dollars to insulate the university from yearly revenue swings. Universities without large endowments, such as the former Mid-Continent University, struggle to survive and occasionally close down. Traditionally, public universities have not had large endowments because their revenue is backed by the full faith and credit of the state. By removing this guaranteed funding, Bevin is putting Kentucky’s universities on an insecure financial footing.

The third problem, and perhaps the most worrisome, is that Bevin wants the legislature to implement a performance funding requirement now with specific metrics only added later. By trying to require performance funding without providing details, he is trying to pass an idealized version without the messy negotiations that are required in politics. The success or failure of performance based models lies in the specific metrics used and the way they are implemented. The National Conference of State Legislatures recommends that when designing performance funding laws the legislature should “engage all stakeholders – policymakers, higher education leaders and faculty members – in the design of the funding system.” Doing this avoids costly mistakes in the design.

It is not clear if Gov. Bevin understands how damaging his proposal could be. The legislature should only approve a performance funding bill that offers funding increases, affects only a portion of the state contribution and specifies the metrics to be used.