Funding by Graduation Rate in Arizona

Joining many states, Arizona may soon tie public university funding to individual college’s graduation rates. According to an article by Anne Ryman at The Arizona Republic:

This year, the Legislature is requiring the Arizona Board of Regents to submit a proposal that would link state funding with gains in specified areas, including most likely increasing the number of graduates. On Tuesday, the regents took the first step toward forming a proposal when they released a 40-page consultant’s report that provides recommendations for moving to performance-based funding.

The report, prepared by education-finance consultant MGT of America, recommends that future increases in state funding, or anything above the $685 million approved for the 2011-12 fiscal year, be tied to performance goals. Those goals include increasing the numbers of college degrees and completed student credit hours and bringing in more money in research grants.

To a certain extent this seems to make sense. Graduation rates are at some level a proxy for success at college, but the idea is somewhat controversial. Commentators in several other states that have considered moving toward funding based on graduation rates have pointed out that an easy way to improve graduation is just to lower standards. Another undesirable way to increase graduation is to admit fewer struggling students; funding based on graduation rates will favor state’s flagship universities and punish nonselective schools.

The effectiveness of the performance-based funding for state universities shouldn’t be a total mystery, however. According to the article, “at least seven states – Florida, Indiana, Ohio, Oklahoma, Pennsylvania, Tennessee and Washington – use performance-based goals in their funding formulas for higher education. Some of the plans, such as Tennessee’s, date back three decades.”

Three decades? Interesting. Well how well is that working out in Tennessee? Did performance-based funding satisfy tax critics and increase the percentage of adults with college degrees? Only 24 percent of Tennesseans have college degrees, that’s below the national average.

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