Does performance-based school funding work?
When a blue-ribbon panel was tasked with studying how Alberta could balance its budget within three years, it recommended a performance-based education funding approach that has rarely been used in Canada.
Led by former Saskatchewan
finance minister Janice Mackinnon, the August report of the blue ribbon panel on Alberta’s finances stated public funding for Alberta’s 26 post-secondary institutions comes with no requirements to train students in the skills the labour market needs.
Neither are there rewards for institutions that commercialize their discoveries.
The report also pointed to a K-12 school funding formula that lacks incentives for efficiencies, innovation or performance.
The U.S. and many European countries have much more experience with performance-based funding, especially for post-secondary institutions.
The arrangements use financial incentives to encourage schools to meet goals set by governments.
Instead of tying all public funding to enrolment counts, or basing a university’s annual grant on funding in previous years, as Alberta now does, performance-based funding makes some government funding conditional.
Thirty-five of 50 U.S. states have some kind of financial reward system for post-secondary institutions that meet government goals.
The measures vary between states, and can include the number of credits a student completes, the number of degrees granted, the types of degree, the number of students who graduate “on time,” research grants from external funding agencies, the number of graduates with job placements or the number of students who obtain professional licences, among others.
Ontario is heading down this path for post-secondary institutions, pledging that by 2025 it will tie up to 60 per cent of public funding for colleges and universities to their success at meeting 10 goals set by the Progressive Conservative government.
In the mid 1990s, Alberta also toyed with the practice, tying two per cent of college and universities’ funding to nine measures of student success and research activity. The government of the day abandoned it when it found the incentive was too small to prompt changes.
Prof. Kevin Mcquillan, a sociologist and demographer with the University of Calgary’s School of Public Policy, said last month it’s “quite reasonable” for the public and the government to want assurances post-secondary education funding is well spent.
Governments should choose indicators that provide meaningful information about whether the quality of education is improving, he said. There’s a risk that institutions will game the system so that what appears as improvement on paper fails to benefit all students.
For example, a 2017 study that looked at 751 U.S two-year colleges in states with incentives for completing programs found that over 14 years, the number of shortterm certificates rose, longer-term certificates stayed about the same, and two-year associate degrees dropped. The study authors said this result was problematic, because an associate’s degree was more beneficial to increasing a person’s earnings than short-term certificates. The study concluded colleges may be steering students toward those less advantageous short-term certificates because it was a quick way to grab performance bonuses.
If institutions are rewarded for graduation rates, Mcquillan said, it could also prompt them to raise entrance standards.
“On one level that’s good, but if the goal is to increase the proportion of young people completing post-secondary, you don’t want to create a situation in which institutions say, ‘That (student’s) too risky,’” he said.
The rewards offered must also be large enough to motivate change, he said. About 54 per cent of Alberta post-secondary institution funding comes from the provincial government.
In an analysis of Ontario’s proposed incentive regime, higher education consultant Alex Usher said there are questions about whether the government will withhold some funding from the sector if post-secondaries fail to meet targets.
“The project’s legitimacy depends on it encouraging performance rather than disguising austerity,” he wrote in a September report for the C.D. Howe Institute.
For Darryl Hunter, associate professor of educational policy studies at the University of Alberta, performance-based funding also raises questions of university autonomy.
He questioned whether universities exist to feed market demand, or if they should work to push the bounds of knowledge.
“Should the institution be there as an agent of the government, or should the university have a higher calling?” he said.
One of the best-known examples of performance-based funding for K-12 schools now serves as a cautionary tale to educators around the world. No Child Left Behind (NCLB) was a nationally mandated set of standards for U.S. schools introduced by former president George W. Bush. It required states develop or adopt standardized tests in reading and math annually in Grade 3-8 and in high school in an effort to boost achievement by disadvantaged students. States and individual schools could face financial bonuses or penalties depending on whether they met targets.
In a 2018 paper, researchers at Colorado’s National Education Policy Centre called NCLB “a failed federal policy.”
The regime morphed into tracking individual teachers’ results, prompting artificial inflation of test results, teaching to the tests and school leaders gaming the system, they said.
If Alberta did adopt performance-based funding for K-12 schools, the province would be a test case for the country, Hunter said.
Should the province be such a test case? Hunter cautioned government to move carefully and with consultation.
Should the institution be there as an agent of the government, or should the university have a higher calling?