Part 1: Welcome to Financing Futures: 2008-2019
By Martha Snyder, Partner, HCM Strategists and Wil Del PIlar, Senior Vice President, EdTrust
Over the past 15 years, we have seen major milestones and policy shifts that have redefined how states fund higher education. From tying dollars more directly to state goals to centering student outcomes, the transformation has been significant.
This period has also been marked by extraordinary change more broadly. Across three presidential administrations spanning five terms, the nation experienced a global pandemic, the rapid emergence of artificial intelligence, and countless social, economic, and political shifts that continue to reshape public life and government. We have seen a lot of change in higher education as well: rises and declines in enrollment, significant shifts in the demographics of college-going students, an increased focus on value in the face of weakening public perception, historical state disinvestment (with a slow reinvestment), and a continued evolution of finance policy.
Let's go back to 2008 when the nation was facing a recession and ushering in a historic presidency. A new vision is needed, leading Lumina Foundation to elevate its goal for the nation, Goal 2025, which prioritizes postsecondary attainment and aims for at least 60 percent of adults to earn post-high school credentials.
This commitment to building talent to meet societal needs, coupled with workforce projection data released in 2010, prompts states to develop clear goals for increasing attainment and policymaker support that presents an opportunity for new postsecondary finance conversations.
2010-2015: A Outcomes-Based Approach to Higher Education Finance in Tennessee and Ohio
Over the next couple of years, states increasingly focus their education policy on attainment, and with that begins a significant shift in one aspect of state funding—with the first "outcomes-based funding models"—aka OBF— aimed at aligning some portion of state funding to support student completion. While we see features of these OBF-type funding models pop up in several states over the next couple of years, no state embraces and implements the concept more holistically than Tennessee who, as part of a more significant agenda reform, shifts to an OBF funding model in 2010, led by Russ Deaton, the Godfather of Outcomes-Based Funding. Russ served as the leader of Policy and Data Division at the Tennessee Higher Ed commission and oversaw the development of the state’s funding model (he is now the Executive Vice Chancellor for Policy & Strategy, Tennessee Board of Regents).
Tennessee’s transition to outcomes-based funding set a trend for states, with implications for institutions and the field more broadly, demonstrating that any state, at any time, can define what it values—and align its funding accordingly.
For states, it was a clear effort to more directly link some portion of funding to state attainment and completion priorities. For institutions, it means responding to shifting expectations and incentives. Too often, policy is considered complete upon adoption, but for lasting impact, implementation matters.
States and other entities have an opportunity to play an important role in supporting their institutions in understanding funding policies and provide tools to assess institutional policies and practices that may inhibit or improve successful implementation.
Ohio is another state who did just that. In 2013, the Ohio Association of Community Colleges (OACC) set out to help its colleges embrace the state's new outcomes-based funding policy.
Laura Rittner, Vice President of Operations & Student Success at OACC, explains how OACC’s support in providing student success data aligned with the state funding formula clearly enhanced institutions’ understanding of connections between the funding and its alignment to student success initiatives on campus—an approach other states begin to notice and adopt.
As time progresses, more states begin to adopt their own versions of OBF policies. To help inform the field and distinguish between the various design and funding features of different state models, HCM Strategists produces the first Driving Better Outcomes typology. First released in 2015 with regular updates through 2020, this report established the first comprehensive, state-by-state breakdown and classification of OBF models, and helped uncover the most critical components of strong OBF policy and differentiate between state approaches to inform policy and research.
This shift to Outcomes-Based Funding will transform how states invest in higher education, directly linking dollars to student success. While it aims to improve accountability and outcomes, challenges will remain—raising questions about equity, effectiveness, and unintended consequences along the way.
2015-2019: Oregon and California Continue Evolving Postsecondary Funding Models With More Explicitly Student-Centered Approaches and Metrics
As states continue to establish attainment goals and analyze progress, a more explicit focus on understanding and addressing gaps across demographics and regions emerges. This evaluation of gaps in opportunity and outcomes across geographic, economic, and racial and ethnic categories also helps further inform funding policies. As a result, the evolution of OBF adoption features more explicit student-centered metrics, and continues to be a critical consideration in present-day funding models.
One state leading the charge is Oregon, which in 2015 revamps its funding model for 4-year institutions. As Ben Cannon, Executive Director for the Oregon Higher Education Coordinating Commission explains, Oregon introduced a new funding model for its public universities—the Student Success and Completion Model, or SSCM, designed to align financial resources with student outcomes. Its structure rewards institutions for both the number of degrees awarded and the students and fields represented. With this shift in funding priorities, Oregon sets an important example for other states in closing opportunity gaps and ensuring that all students have a fair chance to succeed.
Around this time, we see an increasing number of states make additional student-centered refinements to their funding formulas, recognizing the need to build capacity for institutions that enroll higher numbers of underserved student populations.
In 2018, California takes a bold step in reshaping higher education funding, introducing a student-centered funding formula that prioritizes student success, including specific considerations for its most vulnerable populations. Eloy Oakley, President and CEO of College Futures Foundation and former Chancellor of California Community Colleges, explains how California developed the Student-Centered Funding Formula, or SCFF, which added weights for enrolling first-generation students, DACA recipients, and English language learners; provided funding for progress in critical areas, like completing transfer-level math and English; and funding for student outcomes such as degree completion and job placement.
It has not only redefined how California supports its community colleges, but more importantly, how those colleges support their students.
By this point in our timeline, nearly 30 states develop or implement outcomes-based funding in at least one sector. Of these states, 21 include enhancements to support the outcomes of underrepresented populations.
In the same period, the Century Foundation released a 2019 report from the Working Group on Community College Financial Resources, which assesses funding adequacy in postsecondary education. The report underscores the importance of sufficient investment for improving student mobility outcomes and offers policymakers a foundation for future finance decisions. Despite these developments, most funding formulas remain allocation models that outline how to distribute resources to institutions—but they do not determine the level of funding required to provide an adequate education to students.
While there are some efforts to define adequacy in higher education, they are typically rooted in institutional cost drivers rather than broader concepts of what constitutes an adequate education that supports clearly defined student outcomes.
Coming Up
In our next installment, we will journey to 2020 and beyond, taking a deeper dive into the many ways in which the COVID-19 pandemic drastically transformed higher education. While upending our education norms for students and faculty—forcing institutions to pivot to online learning, disrupting academic progress, and reshaping campus life—institutions also faced financial strain coupled with declining enrollments, and the need to provide new teaching methods and emergency student supports.
While some changes were temporary, others will have a lasting impact, shaping financial policy reforms that increasingly prioritize both adequacy and value as essential metrics for funding decisions and long-term success.
Stay tuned! The final installment will be available June 23, 2026.
