Driving Better Outcomes: Typology and Principles to Inform Outcomes-Based Funding Models

The current economic climate and need for expanded access and completion for all students, especially underserved populations, in higher education have sparked renewed interest in outcomes-based funding (OBF) policies, which tie a portion of state funding to institutional performance metrics. Today, more than two-thirds of states are developing or implementing OBF policies.  In a report released today, HCM Strategists’ Martha Snyder and her team take an in-depth look at the evolution of these policies and create a typology for assessing state OBF policies.

The report, Driving Better Outcomes: Typology and Principles to Inform Outcomes-Based Funding Models, provides a history of these policies by state, noting that most adopt outcomes-based funding policies to supplement or replace historic, enrollment-based allocation methods to better leverage existing resources and improve student outcomes and institutional efficiency.  The report, funded by the Bill & Melinda Gates Foundation, also evaluates OBF policies based on key elements they address and the level of funding they command. The aim of this classification effort is to help inform policymakers, stakeholders and researchers by developing, improving and analyzing postsecondary funding policies that incent and yield the best outcomes for students.

Although many states have embraced some aspect of OBF policies, only a few states have developed and implemented fully aligned state finance policies with objectives to increase student attainment and close student equity gaps, and several have not considered these policies as an option. Policymakers, institutional leaders and other stakeholders must continue to evaluate and understand how these finance policies, in their varied design, align with objectives to support students to complete their programs of study successfully.