One of the most popular state policy trends in higher education has been the re-emergence of performance funding. Many states adopted this strategy during the New Accountability movement of the 1990s, but a lack of financial and political support in the early 2000s resulted in many states abandoning these initiatives . Performance funding policies regained popularity in the mid-2000s, due in large part to efforts of many influential organizations, especially the Bill and Melinda Gates Foundation, Lumina Foundation, National Governors Association, Complete College America, and National Conference of State Legislatures. These organizations led a national effort to draw attention to issues related to college completion and often advocated for policies that incentivized completion by linking state appropriations to institutional outputs (e.g., number of degrees awarded, student retention, transfer rates) instead of funding colleges according to the number of students enrolled (McKeown-Moak, 2013).Concerned that the United States is falling behind other countries in terms of degree completion and that colleges are not producing enough graduates to keep pace with changes in the labor market, state policymakers view performance funding as a way to align colleges with broader state policy goals. By funding colleges according to their outputs, rather than inputs, state policymakers believe that these incentives will motivate colleges to increase degree productivity. While there is no question that advocates of performance funding policies have been very 560224E PAXXX10.

State support of public higher education has rapidly declined relative to total state spending. Much of this decline in support is due to the rapid growth in spending on such things as Medicaid. However, relative support of public higher education varies significantly between states. This study applies Tandberg's (2009) fiscal policy framework created to explain state support of public higher education in order to evaluate the relationship between various factors and states' relative support of higher education. While Tandberg's fiscal policy framework accounts for traditional economic and demographic factors in explaining state support for higher education, it also draws attention to political influences as well including the impact of state-level interest groups. Using cross-sectional time-series analysis these relationships are explored over a 19-year period. The findings provide evidence of the significant impact of interest groups and politics on state fiscal policy in regard to higher education.

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In attempting to explain state support of public higher education, this study develops a theory-driven, comprehensive conceptualization of the state political system within a larger theoretical framework that consists of state economic and demographic factors and higher education system attributes. Furthermore, although the higher education policy and finance literature has largely ignored the impact of interest groups on state policy and state support of higher education, they play a central role in the model presented here. The inclusion of politics in the explanatory model results in a more robust and pragmatically useful model.

Using Measuring Up data from 2000, 2002, 2004, and 2006, this study examines the extent to which the state performance grades, and changes in grades, are associated with the characteristics of each state and its arrangements for higher education governance and control. To what extent is each state's higher education performance a product of relatively controllable governance and regulatory practices versus relatively uncontrollable measures of state size, affluence, and demographics? Using both Time Series Analysis and OLS Regression, the results show that the measures of state size, affluence, education levels, and growth account for the greatest share of explained variance in State Measuring Up grades. Few of the higher education governance and accountability practices are statistically associated with the index scores on Measuring Up. Only the centrality of state higher education governance is significantly related to two of the state grades, and the relationship is negative. Moreover, changes in state regulation, performance systems, and governance structures over the past decade have not produced dramatic changes in the grades each state receives on the national report card.