Taxes Governor Rick Perry has decided that in the future he would like his state’s colleges to be distributed state money based on outcomes, not merely enrollment. It’s an interesting idea but one fraught with trouble. In an ideal world the new funding formula would give additional money to colleges with high standards, encouraging other schools to improve.

But Texas is have a hard time figuring out what outcomes matter. According to an article by Reeve Hamilton in the New York Times:

A financing system that includes more “outcomes-based funding” has strong support, including that of Raymund Paredes, the Texas higher-education commissioner, and business leaders like Woody Hunt. But policy makers cannot agree on what outcomes to measure and how to encourage them.

The Coordinating Board’s last proposal would tie financing to total degrees awarded, as well as to degrees awarded to at-risk students and in critical fields. It would also reward institutions for surpassing predicted graduation levels or penalize them for falling short. Under this proposal, some of the schools that produce the greatest number of graduates, including the University of Texas at Austin and Texas A&M , appear to lose financing.

Another worry that many have is that by rewarding schools for producing more graduates, the new funding formula will encourage schools to make earning a degree a lot easier for students. Easy classes and automatic high grades mean a lot more students will persist all the way to graduation.

There’s not really a way to do outcomes-based financing entirely perfectly. It’s worth watching Texas closely however; outcomes based financing for state universities may soon become the next new fad in education policy.

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