State Higher Education Performance Funding for Community Colleges: Diverse Effects and Policy Implications

Abstract

Background/Context Community colleges are central to the United States’ college completion goals. A popular strategy pushed by a number of influential policy organizations and foundations is a policy of tying state funding to community college completions, otherwise known simply as performance funding. This is happening despite little to no evidence that such a strategy actually increases institutional performance. Purpose This study asks: To what extent does the introduction of performance funding programs impact two-year degree completion among participating states? Population/Participants We created a unique panel data set for the period 1990 through 2010, using states as our primary unit of analysis. The data set contains 1,050 total observations, drawing from a range of postsecondary data sources. Research Design We used a quasi-experimental regression technique called difference-indifferences regression technique. We also included in our model multiple control variables and year and state fixed effects. Findings/Results We find that the program had no effect on average and mixed results for the individual states where performance funding was associated with lower completions in six states, greater completions in four states, and inconclusive patterns in nine states. Conclusions We conclude that performance funding is no “silver bullet” for improving community college completions; rather, in some cases, it may interfere with national completion goals. We recommend that state policy makers seek out evidence-based alternatives for improving community college completions.