Arkansas has now become one of the first states in America to create a formula so that funding for public colleges will be based on college performance. According to a piece by Rob Moritz and John Lyon at Arkansas News:

The Senate today approved a bill that would require the Arkansas Department of Higher Education to develop a formula to change the emphasis of state funding for the public colleges and universities from enrollment to graduation rates.

Sen. Johnny Key, R-Mountain Home, who presented Senate Bill 766 on the Senate floor, said the new formula would be phased in over five years starting in 2013. When fully implemented, 25 percent of the funding of colleges and universities would be based on graduation rates.

In May last year the Louisiana board of regents approved a program to give more money to state schools that increase the number of people who graduates.

While the Louisiana and Arkansas funding formulas seem to make sense (reward colleges that have high graduation rates, punish those with high dropout rates) the incentive structure of giving colleges more money for higher graduation is somewhat controversial. As one commentator pointed out in reference to an article about a similar proposal in Tennessee:

Once universities start pushing people through to pump up graduation rates and state funding, college degrees will be as worthless as a high school diploma is today…. I’m sure there is already some pressure to do this for tuition revenue, and one can already see companies moving towards post-graduate degree requirements for lower level jobs.

Let’s see how this plays out. [Image via]

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer