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PAR Says Adopt Performance Funding for Higher Education

Click here for a copy of the report.

A new report by the Public Affairs Research Council (PAR) recommends changes in higher education policy to increase student success rates. “Higher Education Performance Funding: Louisiana’s Options” finds Louisiana institutions continue to rank below their peers on a wide variety of indicators, such as graduation rates and research outcomes. A more progressive funding system with performance-based components could propel the state to become a leader in academic achievement and improve its persistently below-average status.

The PAR report recommends a performance incentive funding system be developed to reward institutions that make significant progress toward meeting newly refined roles, scopes, missions and goals. The report also recommends the development of a statewide strategic plan for workforce development and higher education to link the priorities of all of the state’s post secondary institutions with the state’s economic development goals.

The governor’s focus in the current legislative session has been on improving the quality and availability of the state’s workforce. An effective higher education system is a critical component of any effort to improve the state’s economy. Several proposals currently before the Legislature would begin to implement some of the recommendations in the PAR report. Yet, budget cuts threaten to derail them.

Higher education officials are hopeful that the state’s current wealth will support full formula funding for all higher education institutions and an additional $15 million for a performance funding incentive program. In its current form, however, the budget will not provide full formula funding and the $15 million initiative will continue to go unfunded. Several proposals focusing on workforce development by the state’s community and technical colleges, including $10 million for programs to fill high demand jobs, remain intact.

“It is not enough to provide average funding and then sit back and hope for excellence,” said PAR President Jim Brandt. “To become an economic leader, Louisiana needs a fully integrated approach that coordinates higher education program outcomes at all levels and in all disciplines with the state’s workforce and economic development needs. An important part of this coordination is to provide funding incentives that motivate excellence, especially in fields where Louisiana-based, high-value, high-growth employment opportunities are waiting.”

A 2007 PAR report favored returning tuition-setting authority to the system boards with the caveat that maximum tuition levels be based on peer institutions” charges and relative household income levels. It was emphasized that tuition increases should not be granted without evidence that student success issues are being addressed. One proposal currently under consideration by the Legislature would temporarily return tuition-setting authority to the system boards.

This report builds on and adds to the prior recommendations by calling for alignment of the state’s workforce needs with higher education priorities, revision of the state’s funding formula for higher education, establishment of institutional performance measures and design of a performance funding initiative.

Funding Formula
Recommendation No. 1:Develop a statewide strategic plan for workforce development and higher education to coordinate system- and campus-level priorities with the state’s current and anticipated workforce needs. The plan should be established and regularly reviewed by the major stakeholders, including the Board of Regents, system management boards, the Governor’s Office, the Department of Economic Development, the Legislature, Board of Elementary and Secondary Education, the Department of Labor or its successor, and business and industry leaders.

Recommendation No. 2: Include a factor in the core component of the funding formula to compensate institutions for meeting workforce needs as identified in a strategic plan for workforce development and higher education.

Recommendation No. 3: Incorporate adjustments into the funding formula that compensate each institution for special costs related to its mission, student levels, programs offered and demographics.

Performance Measurement
Recommendation No. 4: Update the institutional mission statements in the Master Plan for Higher Education to include campus-level goals that emphasize the connection between each of the state’s higher education institutions and the goals identified in the new statewide strategic plan for workforce development and higher education.
Recommendation No. 5: Enhance currently reported data on retention, progression and completion by including the rates for transfer, part-time, minority, low-income, first-generation and re-entering students. Statewide and individual institution results should be posted on each measure.

Performance Funding
Recommendation No. 6: Develop a performance funding initiative that defines success for each institution and rewards those institutions that achieve and/or make significant progress toward success in a timely manner. Public recognition for success and consequences for failure should be key elements of the program.
Recommendation No. 7: Develop for each institution specific, mission-driven performance goals that are tied to the broad goals outlined in the master plan and adjusted as necessary to align higher education results with the state’s and/or region’s economic needs.
Recommendation No. 8: Identify a set of performance peers for each institution that are similar in mission, admission standards, student levels and demographics.
Recommendation No. 9: Design the performance funding initiative in a manner to insulate the funding from being easily cut so that the rewards can be relied upon to promote progress toward long-term goals.

In order to move from a below-average state to an economic leader, Louisiana must achieve success levels in higher education well beyond current outcomes. These recommendations could ensure that higher education institutions are enabling their students to achieve success and helping advance the state’s workforce and economic development goals.

The primary author of the report is Cheryl Serrett, PAR Research Analyst. Funding for this research was provided by the Patrick F. Taylor Foundation.

For additional information or to download a copy of this report, write to PAR at P.O. Box 14776, Baton Rouge, LA 70898-4776, visit PAR’s Web site at or call (225) 926-8414.


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