Efficiency for Whom? Varying Impact of Performance-Based Funding on Community Colleges in Louisiana

Abstract

Objective: This study examines whether Louisiana’s performance-based funding (PBF) implementation in 2011 impacts various academic outcomes at community colleges, and whether the impact varies for institutions with higher proportions of underrepresented students. Method: Using institutional-level panel data between 2006 and 2016, I employ difference-in-differences to estimate the average treatment effect of the Granting Resources and Autonomies for Diplomas (GRAD) Act on credential production, retention, and graduation rates of Louisiana’s community colleges. I also examine how this effect differs between minority-serving-institutions (MSI) and non-MSIs, as well as between low-income-student-serving institutions (LSI) and non-LSI by calculating difference-in-difference-in-differences (DDD) estimates. Results: The findings indicate that PBF implementation is positively related to community colleges’ certificate production and graduation rates in Louisiana, but it has no impact on associate degree production or retention rates. Due to PBF implementation, LSIs grant fewer associate degrees than comparable non-LSI institutions. No disparate impact is found between MSIs and comparable non-MSIs. Contributions: Given the prevalence of PBF in the nation, this study examines the overall impact of PBF implementation on academic outcomes of community colleges in Louisiana, and it further disaggregates the community colleges by institutional characteristics, providing evidence for researchers and policymakers to support broad access and student success at MSIs and LSIs under PBF.

Performance-Based Funding in American Higher Education: A Systematic Synthesis of the Intended and Unintended Consequences

“…Several quasi-experimental studies have employed a DD regression approach and shown that PBF can lead to increases in the production of short-term certificates rather than associate degrees (Hillman et al, 2015, 2018; Hu, 2019; Li & Kennedy, 2018; Li & Ortagus, 2019). Hillman et al (2018) examined two of the most robust PBF-participating states, Tennessee and Ohio, and found that Tennessee community colleges responded to PBF by producing more certificates rather than longer-term associate or bachelor’s degrees.…”

“…In an earlier study, Hillman et al (2015) explored the influence of PBF adoption in the state of Washington, finding that community colleges did not improve degree completion but instead increased the production of short-term certificates. In examining Washington’s PBF policy, Hu (2019) found an increase in certificate production and graduation rates but no change in associate’s degree production. These four studies, all of which meet our established criteria for providing strong causal evidence regarding the impacts of PBF, indicate that institutions respond to PBF by improving shorter-term outcomes (e.g., certificate production) at the expense of longer-term outcomes (e.g., associate degree production).…”

Four Decades of Performance Funding and Counting

“…In other words, within states that have a PF policy, colleges will act in ways aimed at improving performance because colleges are provided material incentives from the state (Dougherty and Hong 2006 ; Dougherty and Reddy 2013 ). Studies incorporating a resource dependency perspective typically suggest that colleges that rely more heavily on state appropriations (such as community colleges) will be more likely to engage in the desired behaviors of improving stated student outcomes (Hu 2019 ; Li and Ortagus 2019 ).…”

“…Hu ( 2019 ) examined PF in Louisiana and divided her dataset using the proportion of racially minoritized students at each institution. She designated each institution as a minority-serving institution (MSI) using a 25% enrollment cutoff of that particular group and a 50% enrollment threshold for all minorities combined.…”

“…The author defined minorities as students who were Black/African American, American Indian/Alaska Native, Asian/Pacific Islander, and Hispanic. Further, Hu ( 2019 ) designated institutions that enrolled at least 50% of students who received federal financial aid as low-income-student-serving institutions. By creating this additional difference between institutions, she utilized a triple-difference strategy, where the first difference was pre- and post-PF, the second difference was between treated and non-treated colleges, and the third difference was between treated colleges that were high versus low on enrolling minoritized students or high versus low on enrolling lower-income students, respectively.…”