The Grade Inflation Funding Model

I read Tom Lindsay’s Real Clear Politics article on how graduation rates can be a poor measure of colleges, and it was dead on the money. I especially appreciated his criticism of “outcomes-based funding models.” We at the Pope Center have been wrestling against a similar “Performance-based Funding Model” (to access the proposed model, follow the link to the Policy Discussion in the November 2010 Pre-meeting Materials) here in North Carolina for about three years. The UNC system Board of Governors is pushing very hard for it. So far, the legislature has resisted encoding it into law, but the UNC system is adopting it for determining their budget requests to the legislature.

Of course, it is a major joke. First of all, it is tied to enrollment funding, the old model, in which the more students a school enrolls, the more money the school gets. Under the proposed model, once a school meets its performance (graduation and retention) standards, it gets full enrollment funding. The sensible way to proceed if you want to increase graduation rates without lowering academic standards is to raise admissions standards, thereby eliminating the students most likely to fail.  However, in the performance model, if you do so, you don’t get any money anyhow, since your enrollment didn’t increase. So schools are encouraged to increase graduation rates and increase enrollment at the same time; in other words, you have to dig deeper into the talent pool at the same time you graduate students at a higher rate. As you can guess, it should be called the “Grade Inflation Funding Model.”

Secondly, the measurements of performance used are ridiculously low. In the test year, out of 16 campuses in the UNC system, only three would have received any penalties, and only one would have received no enrollment funding. Given a year or two, all schools in the system would have raised their graduation and retention rates above the standards set for them, one way or the other.

North Carolina’s performance funding model is especially nonsensical considering the recent decision by the Governors to raise the percentage of adult state residents with bachelors degrees or higher from roughly 27 percent to 37 percent. Considering that only 19 percent of the jobs in the state require a BA or better, that’s a blueprint for massive underemployment and a huge waste of time and money. Considering that 27 percent of the adults have 4-year college degrees in a state that already over-subsidizes higher education, you can see what will happen to the cost to taxpayers.

One of the ways they plan to achieve both goals at the same time is to dramatically expand a variety of “handholding” programs—freshman summer boot camps, mentoring and counseling programs for students in danger of failing, and more—for students who would currently not make the cut. These programs will not only also raise costs, but they will do so by directing more money to the least capable students who probably shouldn’t be in an academic program.

As Tom said, albeit differently, the emphasis in higher education should be on quality, not quantity. The Ivory Tower is promoting performance-based or outcome-based funding models because they have the words “performance” and “outcome” in them, which makes people think they are really measuring performance. These models only encourage lower performances; the ploy is nothing but a smokescreen to prevent real reform.  

Posted by: Jay Schalin

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