January 7, 2014

Trend Towards Flat Budgets, Performance-Based Funding in Higher Education

After years of budget cuts, most higher education lobbyists across the country expect flat or slightly increased funding for higher education during upcoming state legislative sessions. According to a survey by the American Association of State Colleges and Universities, three-quarters of states increased spending on higher education by more than 3 percent in the current fiscal year. Despite these efforts, funding for public colleges and universities is still well below 2008 funding levels. Many experts believe that this may be the new normal—with continued economic uncertainty and many other programs, such as Medicaid, K-12 education, or state pensions, competing for the state’s resources, higher education may have to make do with less.

For those states that are increasing funding for higher education, the money is often coming with more strings attached. About 20 states have implemented performance-based funding, which ties state dollars to the accomplishment of certain goals, such as an increased graduation rate, lower student debt, or more STEM majors. Some states, including Washington, are also limiting tuition increases or requiring universities to divert more money to financial aid. While many higher education administrators welcome the chance to improve institutional efficiency and student outcomes, they are also wary of legislators setting unrealistic goals or failing to appreciate the complexity of their institutions.

Washington seems to be following the national trend, both in the expectation of flat or moderately increased funding in the coming session and in the likely adoption of performance-based funding. Governor Inslee’s proposed supplemental budget includes some modest funding for select UW initiatives, but no across-the-board increase. The public institution-led Technical Incentive Funding Model Task Force is exploring ways to implement performance-based funding in Washington. To read more about either of these, check out our blog post on Governor Inslee’s supplemental budget and the Technical Incentive Funding website. To learn more about state budgets and performance funding nationally, check out this article in the Chronicle of Higher Education and this piece in Inside Higher Ed.