AS GOVERNORS and state legislatures press for more "accountability"
in public higher education, performance budgeting has increased in popularity.
Only South Carolina plans to base all of its public higher education spending
on performance factors but some states already use this approach to allocate a small
part of the annual budget, and others are planning to do so.
"The growing popularity of considering results in the funding of state colleges
and universities is clear," according to a recent report from the Nelson A.
Rockefeller Institute of Government at the State University of New York. The report
said two-thirds of the states "either have or are likely to adopt programs that
use results in their budgeting for public higher education."
Joseph C. Burke, who directed the study, said only eight states, including South
Carolina, currently tie appropriations directly to some kind of measurement scheme
but 18 others are expected to adopt such plans in the near future. Still other states
take these measurements into account in a general way but do not tie them to specific
"We don't yet know if this a trend or just a fad," Burke said. "The
rationale makes sense but the implementation details are very difficult."
Dennis Jones, president of the National Center for Higher Education Management
Systems in Boulder, Colorado, agrees that this approach to budgeting sounds appealing
but is devilishly difficult to administer.
"You need a clear understanding of the measurements, so there is no ambiguity,"
said Jones, whose organization has worked on performance budgeting plans in several
states. "And you need agreement on what you are trying to do: Are you trying
to increase the graduation rate? Do you want to improve access? What are the goals?
Often, that's not clear."
The movement has gained strength because governors and legislators, facing increased
pressure for more spending on health, welfare, public schools and prisons, are seeking
evidence that dollars spent on public higher education produce results. In South
Carolina and other states, they have been joined by coalitions of business leaders
who are dissatisfied with the performance of public colleges and universities.
"The business attitude tends to be, 'If we can make these decisions in the
business world (cutting costs, downsizing, introducing technology), why can't it
be done in higher education?'" said Michael Smith of the South Carolina Commission
on Higher Education.
This attitude annoys many educators.
"I don't think these business comparisons are valid," said Bill McCulley,
director of academic programs for the Tennessee Higher Education Commission. "We're
not just making boxes of cereal here; we're improving the lives of our citizens."
Nevertheless, the argument that public higher education should improve its efficiency
and quality, in order to justify the large sums it draws from the public treasury,
is gaining ground.
Performance funding "makes the public feel more comfortable in giving us
increases in the core budget," said Stephen Lehmkuhle, acting vice president
for academic affairs for the University of Missouri system. "That has been healthy
The programs in Missouri and Tennessee are considered by some researchers and
policy analysts to be among the most successful in the country. Both are incentive-based,
utilizing a limited number of performance indicators to allocate about five percent
of the total state higher education budget.
The Missouri approach, called "Funding for Results" (FFR), uses graduation
and retention rates, scores on nationally-normed senior tests and graduate school
entrance examinations and other assessment information to determine how much money
should go to each public institution.
For the current academic year, the four-campus University of Missouri system will
receive $5.1 million in FFR funding, while Truman State University (formerly Northeast
Missouri State) will receive about $1 million, roughly three percent of the campus
budget. "It's a very small percentage, but it's money that can make a difference,"
said Ralph Cupelli, assistant to the vice president for academic affairs at Truman
"Culturally, higher education is beginning to become more accepting to being
accountable," the University of Missouri's Lehmkuhle said. "Initially,
it (performance-based funding) was feared to be a way to build in accountability
and standards set by the state, but that's starting to change"
In Tennessee, where performance funding has been used since 1979, the higher education
commission applies ten indicators to determine how much incentive money (up to 5.4
percent of the campus budget) should go to each school.
The indicators include graduation and retention rates, accreditation of academic
programs, job placement rates, and scores on national tests, among others.
Incentive funding has amounted to about $300 million since the program began,
according to Bill McCulley of the higher education commission. This year's allocation
is $26.7 million, out of a total appropriation of about $1 billion.
The commission has reported that job placement rates in vocational programs have
increased from about 65 percent to about 95 percent since the program began; that
the percentage of accredited major programs has risen from the mid 60s to more than
90 percent; and that scores on national tests have improved dramatically.
The Tennessee legislature is "very happy" with performance funding and
would like to expand it, McCulley said, "but the institutions are concerned
that their base funding might be cut if this goes much over five percent."
Joseph Burke, of the Nelson Rockefeller Institute, hopes that the successes in
Missouri and Tennessee can be repeated elsewhere and that performance funding will
not go the way of earlier, unsuccessful attempts to assess the accomplishments of
public colleges and universities.
"If this turns out to be just one more fad," Burke said, "I'm afraid
governors and legislatures are going to throw up their hands in disgust and forget
about trying to fund higher education."
÷William Trombley and Donald Sevener