After first appearing in 1979 in Tennessee, performance fundingfor higher education went on to be adopted by another 26 states.This monograph reviews research on a multitude of states to addressthese questions:* What impacts does performance funding have oninstitutional practices and, ultimately, student outcomes?* What obstacles and unintended effects do performancefunding encounter?This monograph finds considerable impacts on institutionalpractices, weak impacts on student outcomes, substantial obstacles,and sizable unintended impacts. Given this, the monograph closeswith a discussion of the implications for future research and forpublic policymaking on performance funding.This is the 2nd issue of the 39th volume of the Jossey-Bassseries ASHE Higher Education Report. Each monograph is thedefinitive analysis of a tough higher education issue, based onthorough research of pertinent literature and institutionalexperiences. Topics are identified by a national survey. Notedpractitioners and scholars are then commissioned to write thereports, with experts providing critical reviews of each manuscriptbefore publication.

Executive Summary ixForeword xiiiAcknowledgments xvIntroduction 1Performance Funding: Nature and Forms 5Performance Funding versus Performance Budgeting and Reporting5Performance Funding 1.0 and 2.0 6Types of Performance Indicators: Ultimate and IntermediateStudent Outcomes 7Conceptual Framework and Research Methods 9Conceptualizing the Impacts of Performance Funding 9Data Search 13Data Analysis 14Limitations 15Description of State Performance Funding Programs 17Which States Have Had Performance Funding Programs? 17Florida's Two Performance Funding Programs 19Missouri's Funding for Results Program 23North Carolina's Program for Community Colleges 24Ohio's Old and New Performance Funding Programs 25Pennsylvania's PF 2.0 Program 27South Carolina's Early PF 2.0 Program 28Tennessee's Old and New Performance Funding Programs30Washington's Two Programs: One Abandoned, One Added Later32Policy Instruments and Their Immediate Institutional Impacts35Changing Funding Incentives 35Increasing Awareness of State Priorities 37Increasing Awareness of Institution's Own Performance39Increasing Status Competition among Institutions 40Building Capacity for Organizational Learning 41Intermediate Institutional Impacts 45Alterations to Academic Policies, Programs, and Practices 45Changes in Developmental Education and Tutoring 48Alterations to Student Service Policies, Programs, and Practices49Intended Student Outcomes 53Graduation Numbers and Rates 53Retention Rates 56Remedial Education Completion Rates 56Obstacles to the Effectiveness of Performance Funding 57Inappropriate Performance Funding Measures 58Instability in Performance Funding Levels, Indicators, andMeasures 61The Brief Duration of Many PF Programs 62Inadequate State Funding of Performance Funding 63Shortfalls in Regular State Funding 63Uneven Knowledge about Performance Funding Within Colleges64Inequality of Institutional Capacity 67Institutional Resistance to and Gaming of the System 68Unintended Impacts of Performance Funding 71Costs of Compliance 71Narrowing of Institutional Missions 72Grade Inflation and Weakening of Academic Standards 73Restrictions of Student Admissions 75Diminished Faculty Voice in Academic Governance 76Summary and Conclusions 79Main Findings 79Research Implications 80Implications for Practice 82Concluding Thoughts 90Appendix 91Table A1: Data Analysis Categories: Number of Studies Where TheyAppear 91Table A2: Multivariate Analyses of Impacts of PerformanceFunding on Graduation and Retention Numbers and Rates 96Notes 103References 109References for Individual States 121Name Index 125Subject Index 128About the Authors 133