The Equity Implications of Paying for Performance in Higher Education

Over the past decade, 21 states have adopted performance-based funding (PBF) models tying state funding to measureable outputs. In this study, we ask whether minority-serving institutions (MSIs) experience changes in state funding levels after the introduction of PBF. On average, we find that MSIs in PBF-states lose significant funding per student compared with MSIs in non-PBF states and non-MSIs in the same PBF state. These findings signal that MSIs are, on average, negatively affected by PBF models and could ostensibly alter the missions of these institutions.