David Mark. Photo of Francis Quadrangle, University of Missouri

Lessons Learned: How to Avoid Unintended Consequences When Adopting Outcomes-Based Funding in Higher Education


Thirty-two states have already implemented policies tying funding for public colleges and universities to student outcomes. A growing body of research about these policies reveals important insights and lessons that can help inform the design and implementation of a more effective outcomes based funding system. First, performance information is complex and not always indicative of actual performance. Second, high-stakes performance accountability systems — tied to money– may create perverse incentives that lead to behaviors that undermine the broader policy goals of preparing students for careers and creating an informed citizenry. Finally, policymakers seeking to implement an outcomes-based budgeting system for public higher education can minimize or avoid these pitfalls by being sensitive to differences in institutional missions, capacities, and resources.

The Blue Review