Higher Education

The resurgent interest in performance-based funding for higher education


A report by the American Association of University Professors notes that performance-based funding for higher education has come to reflect the policies and political agendas of many states.


Before the 1980s, references to accountability in public higher education systems usually referred to the contentious role of state-wide authorities, which must balance a need for public oversight with a desire for campus autonomy. For instance, to what extent should decisions about tuition rates and budgeting be left to campus-level leadership? Who should decide on program approvals and closures? These questions remain important, but the focus of state officials has shifted in recent years to outcomes, as opposed to decision-making authority and processes (i.e. how have institutions performed on key metrics).


This “new accountability” movement took shape as the result of incentive systems, which have been designed to link campus funding levels to desired institutional performance outcomes in areas such as student retention and graduation rates, undergraduate access, measures of institutional efficiency, student scores on licensure exams, job placement rates, faculty productivity, campus diversity, and increasingly, student learning.


New accountability efforts have taken three distinct forms:

  • Performance funding links state funding directly and formulaically to the performance of individual public campuses based on various indicators
  • The performance-budgeting approach is less directive, permitting state officials to consider campus performance indicators in determining allocations
  • Performance reporting simply mandates that institutions and systems provide performance information to policy makers and the public, without formally linking that information to eventual allocations


Virtually every state now has some kind of performance-driven policy in place. Performance-driven financing of postsecondary education is an innovation that will not disappear soon. It has the potential to clarify state and institutional priorities, raise the visibility of campus performance, increase transparency and possibly even improve productivity, at least under some definitions.


A strong focus on performance requires higher education institutions to adopt comprehensive performance management system that ties together the institution’s diverse planning, budgeting, performance and programs delivery processes into one integrated management structure. Paper-based systems and spreadsheet software simply don’t allow for this integration.


Through Questica’s higher education budgeting platform, colleges and universities can gain granular insight into their funding, by streamlining data from multiple sources and eliminating inefficient spreadsheets. The flexible software also allows for performance tracking, enabling higher education institutions to establish quantifiable measures for success.


From the outset, Questica’s solutions were designed specifically for the unique needs of the public sector. Performance-based funding for higher education is here to stay. Join the movement by requesting a demo of Questica’s solutions for higher education today.