The latest trend in public higher education policy is to make colleges demonstrate that they’re worthy of public support. But how does this work out for students?

According to an article by Tim Barker in the St. Louis Post-Dispatch:

First their budgets came under the knife. And now the nation’s colleges and universities are facing new scrutiny from legislators and governors who want assurances that scarce tax dollars aren’t being wasted.

The message to higher education leaders is simple: “If you want more money, prove you deserve it.” In the jargon of policymakers, it’s called performance funding.

And little by little, it’s making its way into higher education budgets across the nation, with schools getting more or less money based on their graduation rates and a host of other variables. Missouri recently laid the groundwork for its version of performance funding, while Illinois is in the first year of its fledgling initiative.

According to the article, this new policy is driven primarily by declining revenues. Since there’s less money to distribute, legislators want to at least try to distribute that money in some consistent manner.

Different states enact this performance funding differently. Under the Missouri formula, as proposed, the state will distribute future funding increases by performance, as measured rather complicatedly in five different ways. The state will maintain existing funding levels without change. Other states are more severe, rewarding a full 25 percent of the education budget on performance measures alone.

The effectiveness of performance funding is unclear. Because the policy is driven by desperation over funding, rather than a real willingness to make improvements, it’s unlikely to make state institutions more effective. Performance funding theoretically rewards colleges for doing a good job and punishes them for failure. When it comes to real colleges, however, rewards and punishments get complicated. It’s probably ultimately students who will suffer under the new plan.

It’s doubtful colleges that aren’t “good” at graduating students and preparing them to think, create, and be successful will be inspired by performance funding to redouble their effort to do these things efficiently in order to secure state funds. It’s more likely they’ll just raise tuition when they don’t get state money and pass that to students in the form of higher debt. This is probably the very worst thing to do to students already attending struggling schools.

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