More graduates, more money
Can pay-for-success funding cure the state’s lousy graduation rates?
California’s community colleges have done a bang-up job of getting students in the door, but a terrible job of making sure they graduate.
Six years after enrolling, less than half of 2.2 million students had earned an associate’s degree or transferred to a university, according to the Legislative Analyst’s Office. Graduation rates are considerably lower for black and Latino students, many of whom come to college ill-served by their high schools and unprepared to do college-level work. And a host of attempts to improve on graduation rates have gone nowhere. Over the last decade, the graduation rate has slipped 1%.
Now the state is taking a blunt approach: using funding levels to force reform.
Instead of basing the state dollars that community colleges receive entirely on the number of students who come through the door, as has been the case, the schools will also be rewarded for the number of students who graduate or transfer. Forty percent of state community college money — that’s nearly $2.5 billion — has been tied to the schools’ effectiveness in improving student outcomes and in educating lowincome students.
As both a carrot and a stick, the new policy sounds like a surefire way to boost graduation and transfer rates. But there are grounds for skepticism.
Thirty-five states have adopted versions of a pay-forsuccess model for community colleges and universities, and nowhere has it led to more graduates. Instead, schools have gamed the funding system, garnering more dollars by pushing students into easier majors or herding them into short-term certificate programs. What’s worse, colleges with a high proportion of minority students have lost out because of their relatively low graduation rates.
California’s approach is different because it isn’t just about paying for one kind of success — it rewards increased graduation and transfer rates and increased enrollment and graduation of low-income students.
A just-published Century Foundation report concludes that “outcomes-based funding models can … advance equity and efficiency” if those models “are finely tuned to ensure the adequacy of funding for institutions that serve large numbers of disadvantaged students and to protect access for those students.” This looks like what California is trying to do. And based on state projections, the nine-college Los Angeles Community College District, which indeed serves large numbers of disadvantaged students, could get an additional $70 million.
Everyone agrees that it’s crucial to improve graduation rates. The huge disparities between enrollees and those who complete a course of study or transfer amounts to a multibillion-dollar policy failure, and not just because state funds are wasted in the process. Students who drop out of community college pay a hefty price.
Economists calculate that community college graduates earn, on average, several hundred thousand dollars more than those with just a high school diploma, and the premium on earning a bachelor’s degree is at least double that amount. Studies show that leaving college also makes it less likely that someone will own a home or participate in politics. It even negatively affects health status and life expectancy.
The rest of us lose out as well. To keep the state’s economy humming, the Public Policy Institute of California estimates that we’ll need more than a million more college graduates by 2030. For that to happen, colleges must do a better job.
Big questions about the impact of the new law remain unanswered. Equity advocates have cause for concern because the community colleges don’t start out on an equal footing. The student-teacher ratio at East Los Angeles Community College, for example, is a scandalously high 48 to 1, nearly double the ratio at Pasadena City College, so it should come as no surprise that the East L.A. students are less likely to graduate. There’s no reason to believe that punishing poor-performing colleges such as East L.A. with fewer dollars will make them better.
And even with the dual reward scheme written into the law, community colleges will be tempted by their need for funds to find loopholes where they can.
It’s worrying, for example, that the measure provides the same amount of outcome-based funding for any credential, which may prompt schools to concentrate on certificate programs, whose graduates often earn no more than students with a high school diploma.
The schools can also get rewarded for the number of graduates who find “living wage” jobs — isn’t higher education supposed to do more than keep people off the dole? And to make sure that colleges aren’t turned into diploma mills, instructors need to be protected against pressure to award higher grades or else risk losing their jobs.
The new funding formula makes a bet that a carrot-andstick approach will lead to an uptick in graduation and transfer rates. For the sake of the students, let’s hope the bet pays off.