Performance-Based Funding, U.S.

Performance-based funding (PBF) in higher education is a resource allocation methodology that shifts how institutions are funded from an enrollment-based (inputs) method to funding on the basis of student success outcomes (outputs). These outputs or performance indicators represent key points in a student’s educational path, such as completion of developmental coursework, college-level credit accumulation, and credential completion. PBF has its roots in resource dependence theory, which postulates institutions of higher education, whose ability to operate relies on the state appropriation, will adapt their behavior to achieve the outcomes that best protect their funding. The way outcomes are tied to funding varies and has evolved over time but is generally categorized as either bonus funding above and beyond an institution’s base allocation from the state, or ...