June 25, 2014Bookmark and Share

Performance Funding at MSIs

Considerations and Possible Measures for Public Minority-Serving Institutions

Performance Funding
States are increasingly funding higher education institutions based on their performance or outcomes instead of relying solely on student enrollment to determine funding formulas. Performance Funding (Also called Performance-Based and Outcomes-Based Funding) policies provide state support to public colleges and universities based on outcome measures using input metrics, like incoming-student composition, progress metrics like retention rates, and output metrics such as graduation rates.

Nationally, more than 60% of students of color who are enrolled in public higher education are attending Minority-Serving Institutions (or MSIs). MSIs include Historically Black Colleges and Universities (HBCU), Hispanic Serving Institutions (HSI), Tribal Colleges and Universities (TCU), Alaska Native and Native Hawaiian-Serving Institutions (ANNH), Native American-Serving Nontribal Institutions (NASNTI), Predominately Black Institutions (PBI), and Asian American and Native American Pacific Islander-Serving Institutions (AANAPISI).

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There are over 500 public MSIs within 23 of the 25 states that have adopted Performance Funding policies, all of the states that are currently transitioning to Performance Funding policies, and 9 of the 12 states that are having formal discussions about Performance Funding. An important first step for policy makers designing Performance Funding policies is to identify the public MSIs in their state, thus a full list of public MSIs by state is provided in the full report. The proportion of minority students who are enrolled in public institutions of higher education who are also enrolled at public MSIs by state is provided in the map.

Students of color seem to be especially concentrated at MSIs in southern states, but in most cases the majority of the students of color who are enrolled in public higher education are enrolled in their states’ public MSIs. MSIs, play a significant role in ensuring higher education access and success for minority students enrolled in public higher education.

The concentration of students of color at public MSIs suggests that policy makers have to be especially careful that Performance Funding policies based on outcomes like graduation rates do not result in increased selectivity, thus further restricting access at the states non-MSIs and exacerbating existing stratification. 
Key Considerations for Developing Performance Funding Policies for MSIs
1. Include Minority-Serving Institution (MSI) Leaders/Experts in Policy Development. Consider the perspective of those working closely with MSIs when developing Performance Funding policies. 
2. Re-Consider the Utility of Commonly Used Metrics. Commonly used metrics like graduation and job placement rates can pose challenges for accurately capturing the performance of Minority-Serving Institutions, and in their current conceptualization are problematic overall. 
3. Metrics should be Responsive to Input Factors. Institutions that have diverse “inputs” or student populations should not be subjected to uniform evaluations of outcomes or performance. 
4. Address Data Capacity before Implementing the Policy. Higher education institutions operate with varying levels of resources and capacity that in addition to the population of students they serve, drive outcomes. 
5. Use Performance Funding Policies to Address Racial and Ethnic Equity. In addition to populations such as low income and adult students, racial and ethnic groups should be included in Performance Funding equity metrics that reward campuses for the enrollment and success of underserved groups. 

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