The London School of Economics and Political Science
August 2014
Historically, oversight of higher education has been oriented toward regulating inputs and procedures, but over the last few decades policymakers have increasingly demanded that universities be held accountable for their performance, particularly with respect to undergraduate student outcomes. The average public four-year college in the United States graduates less than 60 percent of its students in six years, and graduation rates for many racial/ethnic minority groups are much lower. As student outcomes have continued to lag at public colleges and universities, there has been a significant shift in the way that many people think about the need for accountability and transparency with regard to higher education.
Performance funding, initially adopted in 1979 by Tennessee, became increasingly popular during the 1990s as a number of states began to implement a wide range of results-oriented reforms. When states felt the impact of a series of economic recessions during the mid-2000s, performance funding (which often centered on awarding bonus funding) waned in popularity, and several states dropped the performance component of their funding criteria. In the last few years, however, these policies have reemerged, largely due to the efforts of reform-oriented organizations such as Complete College America and the Bill and Melinda Gates Foundation.