How performance-based funding plan could work at Penn State

This story was produced by the State College regional bureau of Spotlight PA, an independent, nonpartisan newsroom dedicated to investigative and public-service journalism for Pennsylvania. Sign up for our north-central Pa. newsletter, Talk of the Town, at spotlightpa.org/newsletters/talkofthetown.

STATE COLLEGE — Democratic Gov. Josh Shapiro has proposed creating a predictable funding formula and boosting state support by 5% for the state-related universities — Lincoln University, Penn State University, Temple University, and the University of Pittsburgh.

This new model would tie public funds for the universities to certain metrics, but it is not yet clear what those would be. Taxpayer support for the state-related institutions would also pass through the Pennsylvania Department of Education as grants with a majority vote from the legislature rather than require a two-thirds vote, which is the current model.

In recent years, state House Republicans have delayed funding the schools over political beliefs. Last budget cycle, funding for the universities was not approved until five months after the budget deadline, and passed alongside a separate bill that increased transparency requirements for the schools.

“We need to fix the way we fund our state-relateds — Pitt, Penn State, and Temple — along with the nation’s oldest degree-granting HBCU, Lincoln University,” Shapiro said during his February budget address. “For too long, we’ve under-funded them and subjected them to political games.”

The proposed performance-based funding model is used by more than half of states across the country, though experts warn such plans can have unintended consequences if not constructed thoughtfully.

Increase in taxpayer funding

Shapiro’s plan calls for a 5% increase in funding for each of the state-related universities:

$18.4 million total for Lincoln University;
$272.1 million total for Penn State;
$154.9 million total for Pitt;
and $158.2 million total for Temple.

The state has not increased support for Penn State, Pitt, or Temple since fiscal year 2020. Pennsylvania ranks 49th nationally in public funding for higher education per student, according to the State Higher Education Executive Officers Association. Additionally, state funding for the state-related universities has not kept pace with inflation over the past 15 years.

State law requires that the universities spend the appropriation only on costs directly related to student instruction or student-related services. The universities often use the money to create tuition discounts for in-state residents, though it is difficult to track exactly how they spend the money.

A new funding model

Shapiro is proposing a performance-based funding model for the universities, though details of the plan are still being ironed out — to the consternation of some elected officials in recent budget hearings.

Representatives from each of the state-related universities are part of a working group on higher education. Steve Orbanek, communications director at Temple University, told Spotlight PA via email the working group had met only twice as of early March.

During his February budget address, Shapiro said the formula should incentivize increasing enrollments of first-generation students, keeping alumni in Pennsylvania, and ensuring students in nursing, education, and agriculture graduate.

The Pennsylvania State System of Higher Education already uses a version of the model. During a Feb. 21 hearing before the state House Appropriations Committee, PASSHE Chancellor Daniel Greenstein said the system’s funding plan focuses on sustainable enrollment growth and incentivizes supporting low-income students and students of color.

Not all outcome-based models are the same, Greenstein told the lawmakers, noting different models can prioritize different things.

“If you wanted to, we could develop a performance-based funding model to improve the production of volleyball players from private institutions,” Greenstein said.

Penn State President Neeli Bendapudi has advocated for a performance-based funding model similar to Shapiro’s proposal and pushed state lawmakers to boost support for her university, which receives the lowest amount of per-student public support.

What research says about performance-based funding

Spotlight PA spoke to two education experts and reviewed research on performance-based funding plans, which showed mixed results for improving academic success or degree completion.

“The biggest advantage of performance funding is it gives the public trust in higher education,” said Robert Kelchen, a professor of higher education at the University of Tennessee, Knoxville. “It doesn’t particularly improve outcomes, but it at least gives the sense to the public that colleges are accountable for their performance.”

Kelchen co-authored a 2020 study of the funding models, which found that the plans can inadvertently hurt marginalized student groups if specific mitigating measures are not built into the models.

For example, if a funding model prioritizes only degree completion, universities and colleges might become more selective in who they admit. If the model does not account for student financial needs and resources, it can widen gaps between well-resourced institutions and their smaller peers, Kelchen said.

“You want to give colleges an incentive to actually serve students whose success isn’t guaranteed,” he said.

States that use performance-based funding do not use the model to determine the entirety of a school’s funding, Kelchen said. Most states allocate less than 10% of an appropriation through such a model, though some states use the model for more than 80% of a school’s total allocation.

Last year, state Rep. Jesse Topper (R., Fulton) proposed legislation that would provide additional state funding to Penn State, Pitt, and Temple if they met specific metrics, including graduation rates, retention rates, net tuition and fees, and enrollment in certain programs.

The bill was referred to the chamber’s Education Committee, on which Topper is the minority chair. The representative told Spotlight PA he is cautiously optimistic Pennsylvania will adopt a funding model similar to what he has suggested.

“Any time you can support investment with data, that’s good public policy,” he said.

During a February hearing before the state House Appropriations Committee, leaders from each of the state-related universities said a performance-based funding model should be created in collaboration with the legislature and account for the unique missions of each institution.

“I’m in favor of formulas because they are more transparent, but the formula has to take into consideration a really broad range of things,” Brenda Allen, president of Lincoln University, told lawmakers. “And I think we have to think very deeply and creatively about what those things are.”

Spotlight PA asked each of the universities to gauge which metrics would be most important to them in the new model.

Representatives from Penn State, Pitt, and Temple said it was too early to discuss specifics.

“There are many potential metrics, but some common metrics used by other institutions of higher education are enrollment, degree completions, graduation rates, transfer rates, and post-graduation economic success, to name just a few,” a Penn State spokesperson told Spotlight PA via email.

Lincoln did not respond to a request for comment.

During a February hearing of the Pennsylvania Senate Appropriations Committee, state Sen. Lindsey Williams (D., Allegheny) said the funding formula working group expects to share its recommendations by April 10. The state’s education department did not respond to a request to confirm this timeline.

SUPPORT THIS JOURNALISM and help us reinvigorate local news in north-central Pennsylvania at spotlightpa.org/donate/statecollege. Spotlight PA is funded by foundations and readers like you who are committed to accountability and public-service journalism that gets results.