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Gov. Scott Walker has said he will propose new funding for the University of Wisconsin System that is tied to performance in the next state budget.

Gov. Scott Walker’s plan to provide new funding for the University of Wisconsin System based on its performance in measures such as graduation rate and job placement would subject the System to a budget model that critics say has failed to deliver on its promise to improve higher education.

But proponents of the idea, known as performance-based funding, disagree. They say a well-designed plan to tie UW’s dollars to student outcomes could lead to institutions serving those students, and the state, better.

It could also improve the System’s relationships in the state Capitol — something UW’s leaders have sought to do in recent years — by making clear to lawmakers and campus officials the expectations for colleges and universities, backers say.

Since the 1990s, more than 30 states have started using some form of performance-based funding in their higher education systems.

Wisconsin is one of them. The state’s technical college system began distributing money based on performance in certain measures during the 2013-14 school year, an arrangement officials and Walker say has been working well for those schools, although some of the colleges’ important functions aren’t measured by the criteria.

Walker has said he plans to include new performance-based funding for the UW System in the 2017-19 state budget. He has not said how much new funding he will seek or exactly how the System would be measured.

The new funding would reverse the trend in recent budgets of declining state support for UW — the 2015-17 budget cut $250 million from the System. About $1 billion of UW’s $6.2 billion annual budget comes from the state.

Within higher education circles, though, the value of performance-based funding, or outcomes-based funding as some call it, is far from settled.

“The idea of linking funding to performance is very politically appealing,” said Nicholas Hillman, a UW-Madison education professor whose research has questioned the model’s effectiveness. “But when you start to scratch the surface … we actually don’t see as much activity.”

Hillman reviewed 12 studies comparing states that have instituted performance-based funding with those that use more conventional funding models.

The studies showed little or no improvement in the graduation rates or number of degrees awarded in states with performance-based funding, Hillman said.

His review also found that performance-based funding can lead to a range of unintended consequences.

Colleges being judged on their graduation rates might become less likely to admit minorities or low-income students who officials think are less likely to graduate, which could make institutions less diverse, he said. The schools that benefit most under performance-based budget models also tend to be institutions that already have a lot of resources, while less well-off campuses that often serve low-income students and minorities don’t measure up as well and miss out on funding, according to Hillman.

“There are real question marks about who gets those funds and whether it reproduces inequality,” he said.

Changes may take years

Dennis Jones, president emeritus of the National Center for Higher Education Management Systems, countered that it’s too early to judge the effectiveness of many performance-based funding models. Only in the past several years have states embraced more comprehensive outcomes-based funding that ties a large proportion of their higher education system’s budget to performance.

“I don’t know how you draw conclusions on the basis of short history,” Jones said.

States have also implemented performance-based funding in a variety of ways, Jones noted, from the measures they use to evaluate schools to the amount of money they distribute based on outcomes.

Nearly all of Tennessee’s higher education funding is performance-based, for instance, while less than 1 percent of Illinois’ is. Wisconsin’s technical colleges distribute 30 percent of their $88.5 million in annual funding based on performance.

To create an effective performance-based funding system, Jones says lawmakers and universities must customize the criteria to their state and its colleges.

UW officials say Walker has indicated he wants to collaborate with them to develop the performance categories, and note they already track much of the data the governor has said he wants to measure.

Lawmakers should work with campus officials to first answer important questions about what they want out of their higher education system, Jones said, then find the performance criteria they can use to measure that and reward institutions for making progress toward the goal.

“Be clear up front about what it is that they’re creating incentives for,” Jones said. “What are the goals we’re trying to reach here?”

Tech colleges a

state model

Officials say that was one reason the Wisconsin Technical College System sought out performance-based funding.

Colleges are measured by their performance in nine categories, which include the number of degrees awarded in “high-demand” fields and how many students find jobs in their field of study. Schools are also rewarded for how many students come from “special populations,” a group that includes minorities, veterans, the disabled and low-income students, among others — the sort of measure Jones said helps address the equity concerns Hillman raised.

Jim Zylstra, an executive vice president of the system who oversees outcomes-based funding, said it’s too early to fully analyze the effects of the funding model, which was put into place during the 2013-14 school year.

But he said colleges have made changes in response, citing a growing number of programs that let high school students take courses for college credit.

So-called dual enrollment programs are one of the measures technical colleges receive funding for, and the number of credits high school students have earned from WTCS institutions has grown from 92,613 in the 2012-13 school year to 117,203 in 2014-15.

Zylstra, who helped oversee the creation of the performance categories, said connecting funding to outcomes has sharpened colleges’ focus on those areas, while also showing their “return on investment” to lawmakers and the state.

The system received a $5 million annual increase in its state funding when it adopted the performance measures.

“We’re pleased with how the formula has been working … and how our colleges have responded,” Zylstra said.

He acknowledged not everything the colleges do is measured by the performance criteria.

Technical colleges aren’t rewarded for how many of their students successfully transfer to four-year schools such as UW-Madison, for instance, or for their police and firefighter training programs — two key roles of technical colleges.

Zylstra said that’s why it’s important to keep conventional funding for the technical colleges. The System is expected to ask lawmakers in the next state budget to limit performance-based dollars to 30 percent of its funding.

Still, sitting down together and agreeing on concrete measures for institutions’ performance can address lawmakers’ concerns about making sure colleges and universities are held accountable for the money they spend, Jones said. Though he acknowledged he has not seen data to indicate performance-based funding improves outcomes, Jones said the process of creating those systems can reap benefits for universities.

“They serve to build a lot more trust between institutions and legislators,” Jones said. “That just improves the environment, if nothing else gets accomplished.”

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