Washington’s Student Achievement Initiative (SAI), started in 2007, is one of the nation’s longest operating and most conscientiously designed performance-based funding systems. Built with benchmarks that would incentivize community colleges to enroll underprepared students, it rewards colleges whose students develop college-level skills (through Adult Basic Education and developmental course work), stay in college for a full year, complete a college-level math course, and earn a certificate or a degree. However, a recent study of Washington state’s SAI, published inEducation Evaluation and Policy Analysis,finds little improvement in student retention and degree completion rates as a result of performance funding. In fact, rewarding colleges for the number of credentials they produce seems to have led to an unintended outcome–and a far less valuable one for students or the state: increased certificate production. (Clickherefor article about the study’s results; clickherefor a short video of one of the report’s authors discussing their findings.)While the Washington State Board for Community and Technical Colleges points out that the period studied (through 2012) occurred during a statewide recession, the (modest) growth in degree production after 2012 has predominantly occurred in “applied” (workforce) degrees, including the newly developed applied bachelors degree offered at nearly half of the two-year colleges in the state.

Given thatmore than 30 states have or are in the process of revising state higher education funding modelsfrom enrollment-based models to ones that allocate, in part, based on student outcomes and that the Department of Education, too,plans tie financial aid to performance outcomesusing its newly developed Postsecondary Institution Rating System, these findings are significant for policymakers.According to Hillman, one of the study’s authors, this study demonstrates that “[t]here is no easy solution to improving college performance. Most schools do not have the capacity to make improvements with current resources. That’s especially true of community and technical colleges, which are already known for having to do the most with the least amount of resources.” Tying funding to “outputs,” such as credentialing, may push colleges to respond in ways that do not promote the state’s long term goals of increasing the education levels and earnings of its residents. Such performance-based funding systems also fail to reward the myriad conditions necessarily to promote student success and retention, such as academic support, campus climate, financial aid, and student engagement and satisfaction.