Since 2007 Indiana has had completion-based performance funding that comprises 7 percent of state appropriations—although the Indiana Commission for Higher Education has recently recommended tripling the amount of funds tied to performance funding. In December 2009, the state cut $150 million or 5.5% of state funding to higher education institutions, but instead of an across-the-board cut the Commission made their decisions based on graduation rates, cutting between 3.5 and 6.6 of each institution’s budget.
Performance funding has, by some accounts, created some perverse incentives for Indiana’s colleges and universities. Ball State is moving to reduce the minimum number of credit hours required for a diploma to 120 from the current threshold of 126, in an effort to boost their graduation rate to 65 percent by 2015 and protect their institutional funding.
Resources:
Indiana Economic Digest ”State Links University Funding to Lifting Graduation Rates”
Midwestern Higher Education Compact “Completion-based Funding for Higher Education” (pdf)
Indiana Commission for Higher Education “Results Matter: Performance Pay and Higher Education” (pdf)
