Tennessee and New Mexico give money to public colleges and universities for graduating high numbers of older and low-income students. Mississippi uses the power of the purse to promote science and technology programs. And Missouri is tying taxpayer dollars to graduation rates and students’ scores on tests and professional licensing exams.
The goals differ from state to state, but performance-based funding is a growing trend in higher education. Traditionally, states subsidize schools based on how many students they enroll. But a dozen states now tie funding to performance, four are moving in that direction and another 20 are considering it, according to the National Conference of State Legislatures (NCSL).
In most states, the portion of public money tied to performance is still relatively small — typically between 2 percent and 5 percent. But tight state budgets, rising tuition rates and a sharper focus on producing graduates with marketable skills may change that.