- Background: Legislators and higher education policy makers increasingly are turning to policy initiatives to incentivize institutions of higher education to transform policies and practices in the name of student success, with success typically defined as retention and graduation rates. One such policy receiving increased attention amongst states is outcomes-based funding, a state-level funding model that rewards institutions for better performance towards--or outcomes on--specific metrics.
Purpose: While research on the effectiveness of outcomes-based funding (OBF) towards achievement of state level metrics is growing for universities, little research exists as to whether such it is an effective policy tool for community colleges. Therefore, the purpose of this study was to examine whether states that implement an OBF model experience a statistically significant increase in student success indicators by aggregating community college student success data within each state.
Research Design: The unit of analysis for this study is states that implemented OBF for its public community colleges, noting that institutional data was aggregated to provide a state-level view of retention and completion rates. The population included individual states that dedicated a portion of funding towards enrollment, regardless of the level of funding or how funding was administered. In support of advocacy coalition theory, this study employed a longitudinal analysis, measuring part-time student retention, full-time student retention, and completion rates over a 10-year period (measured at three years before and seven years after implementation of an OBF model). This framework yielded the five states included in this study: Arkansas, Indiana, New Mexico, Texas, and Washington. A right-tailed p-hat test was used to determine significance and binary regression analysis was used to control for variables known to positively affect retention and graduation rates.
Findings: This study concluded that only three states experienced a statistically significant change over time in retention rates--Arkansas, Texas, and Washington, noting that Arkansas's change was negative. When controlling for the independent variables, results indicated that outcomes-based funding did not yield statistically significant results (p > .95) for retention rates. Additionally, this study found that only one state--Texas--experienced a statistically significant change in graduation rates and like Arkansas, this change was negative.
Conclusion: This study concludes, similar to other studies, that outcomes-based funding may not be an effective policy tool for increasing statewide student success metrics. Readers are cautioned, however, that these results study need to be taken in concert with findings from other current and future OBF research and that the analysis method used is not intended to demonstrate causality. A question for policymakers is whether OBF models should recognize the comprehensive mission of the community college or whether community colleges should begin a shift in their mission to address OBF models. Future research possibilities include, but are not limited to, inclusion of other states as they adopt and sustain such models, as well as dedicate additional funds to performance; review of what characteristics of various outcomes-based funding models yield the greatest success; and the need for additional quantitative OBF research.