Higher Education

Performance-Based Funding for Higher Education Requires Performance-Based Budgeting (PBB)


The National Conference of State Legislators (NCSL) helps strengthen state legislatures by providing research, publications and technical assistance about the legislative institution, and its processes and procedures. In the 2015 report, Performance-Based Funding for Higher Education, the NCSL noted the following:


“Historically, many colleges have received state funding based on how many full-time equivalent students are enrolled at the beginning of the semester. This model provides incentives for colleges to enroll students and thus provide access to postsecondary education, but this model does not necessarily provide incentives for institutions to help students successfully complete degree programs. Many states are reconsidering the enrollment-based funding model and instead are aligning funding models with state goals and priorities.”


32 states have a funding formula or policy in place to allocate a portion of funding based on performance indicators such as course completion, time to degree, transfer rates, the number of degrees awarded, or the number of low-income and minority graduates. Five states are currently transitioning to some type of performance funding, meaning the legislature or governing board has approved a performance funding program and the details are currently being worked out.


In addition to the trend noted in the NCSL report, both the Government Accounting Standards Board (GASB) and the Government Finance Officers Association (GFOA) are promoting performance measurement, indicating it may soon become a requirement. Since most states now require outcome evaluations (performance measurement) in their funding of higher education, colleges and universities need to adopt the practice of developing budgets based on the relationship between funding and expected results. Supporting budget requests with performance measures and using those measures during budget deliberations constitutes performance-based budgeting (PBB).


In the budget-building process, PBB relies on:

  • Strategic planning
  • Operational planning
  • Performance accountability
  • A realistic performance measurement system

Conventional budgeting and financial management systems are no longer sufficient to deliver performance-based budgets. PBB requires a fully integrated solution that links strategic planning, performance budgeting and performance reporting in a system that has been designed specifically to meet the unique needs of the higher education institutions.


Questica Budget represents a proven commercial-off-the-shelf (COTS) software solution. Questica delivers all of the necessary performance-based budgeting tools, while also offering a high level of configurability and integration to a wide variety of ERP systems.


Questica Performance allows colleges and universities to establish and manage objectives, leveraging financial and statistical data from any number of sources to effectively measure performance. Simply put, Questica Performance will improve your institution’s efficiency and effectiveness. Scorecards are a built-in method for the ongoing monitoring of measures, making use of the green/yellow/red thresholds in the at-a-glance Dashboard displays.


Questica Budget currently manages over $55 billion in annual public sector budgets. If you would like to leverage the best practices contained in a proven performance-based budgeting solution, request a demo and find out more details.