Most performance- or outcomes-based funding (POBF) models seek to address accountability and not equity, so they do not always account for the additional resources that minority-serving institutions (MSIs) require to serve their students. We found this to be the case in Texas and Washington, two states that have adopted POBF for two-year institutions in the last decade. In both states, funding levels for MSIs were on par with those for non-MSIs, and that’s the potential problem: Because MSIs serve larger percentages of students who are traditionally underserved in our K-12 system, they require more resources and supports to best serve these students — and funding is at the core of that.

When designing POBF formulas, states should craft formulas that account for the greater challenges and lack of resources more often found at MSIs. POBF formulas should take into account the challenges that historically underserved students bring and include outcome metrics other than graduation rates, like progress in completing developmental education courses when assessing performance.

Our work is based on a study of Texas and Washington detailed in a forthcoming article in Community College Review that builds off of the book Outcomes-Based Funding and Race in Higher Education: Can Equity Be Bought? In Texas, minority-serving institutions make up nearly half of the public community college districts. Here, all of the MSIs are Hispanic-serving institutions (HSIs) with one community college district designated as both an HSI and an Asian American and Native American Pacific Islander-serving institution (AANAPISI). In Washington, almost one-third of community and technical colleges are MSIs, consisting of both AANAPISIs and HSIs. MSIs in both states receive somewhat comparable funding with non-MSIs, but, as we have indicated, that itself can be a disadvantage.

Texas allocates 10 percent of state funding based on POBF metrics. Washington, on the other hand, allocates just 1 percent. In both Texas and Washington, POBF formulas direct money to colleges based on student completion of developmental education courses (non-credit bearing), pre-college math courses, and pre-college English courses. Colleges earn points when a student completes a certain number of credit hours (e.g., 15, 30) or completes a degree, certificate, or apprenticeship. Performance points earned by the colleges translate into funding that the state gives to the colleges.

Our findings show MSIs in Texas earned slightly more performance points per student than non-MSIs for students completing their first credit-bearing math courses and transferring to universities. Non-MSIs earned more points, marginally, than MSIs for students completing their first semester (15 semester credit hours) and for earning degrees in critical fields (e.g., STEM). For other metrics, such as developmental education and gateway reading and writing courses, MSIs and non-MSIs earned the same number of points — although MSIs earned more total points per student.

In Washington, MSIs earned more performance points per student on developmental education in every year from 2009-10 to 2014-15. Under this metric, points are awarded when students increase their basic literacy and math skills. However, across all years, non-MSIs earned more points for students completing pre-college math and English course sequences. In all but one year, non-MSIs earned more points for degree, certificate, or apprenticeship completion. On milestone credit hour attainment (15, 30, and 45 credits), retention, meeting the math requirement, and total points earned, neither MSIs nor non-MSIs earned more points consistently across years.

Although MSIs in Texas and Washington are not disadvantaged by POBF, they do not benefit from this funding model. In addition, our findings suggest that most output metrics (e.g., degree completion) advantage non-MSIs (at the expense of MSIs). Policymakers should consider that POBF model designs that focus on outputs might be detrimental to MSIs.

More than 30 state now have adopted or are in the process of adopting a formula that divvies out funding to public colleges and universities based on their outcomes for students. Called performance- or outcomes-Based Funding (POBF), these policies are inconsistent in their design, and in many cases, perpetuate longstanding inequities in our education system. In this series, we explore the current landscape around POBF policies and what states can do to build more equitable policies. This is the third post in this series, which draws from the book, “Outcomes-Based Funding and Race in Higher Education: Can Equity Be Bought?

Amy Li is an assistant professor in higher education and student affairs leadership at the University of Northern Colorado, Denisa Gándara is an assistant professor of education policy and leadership at Southern Methodist University, and Amanda Assalone is a postdoctoral research and policy analyst at the Southern Education Foundation. All are co-authors of the book, “Outcomes-Based Funding and Race in Higher Education: Can Equity Be Bought?

Read the other parts of our “Can Equity be Bought?” series: