Pros and Cons of the Proposed Funding Model Change for Higher Education Institutions

By: Dr. Tirdad Daei

Introduction

In light of declining overall enrollment in higher education, the issue of funding for public universities and colleges has become a significant concern. Recently, the public higher education institutions in Missouri have been presented with the opportunity to receive a 3% funding increase. This increase has been approved by Governor Mike Parson, who signed the Fiscal Year 2025 operating and improvement budget, which includes a 3% increase compared to the previous year. However, there is also a proposal to transition from the current Basic Plus Funding Model to a Performance-Based Funding Model. In this article I aim to examine the pros and cons of this recent decision and its potential implications for higher education institutions in Missouri.

Pros of the Proposed Funding Model Change

1. Encouraging Competition: The performance funding model can incentivize universities to compete for funding by demonstrating their effectiveness and efficiency. This competition may lead to improved educational outcomes and increased accountability among institutions.

A performance-based funding model can create an environment where universities strive for excellence, leading to enhanced student experiences and improved institutional performance.

2. Resource Allocation: By tying funding to performance metrics such as graduation rates, job placement, and student success, the proposed model ensures that resources are directed towards institutions that demonstrate effective outcomes. This can lead to a more efficient allocation of funds and increased accountability for universities.

Performance-based funding models help ensure that taxpayer dollars are invested in universities that deliver tangible results, ultimately benefiting students and the state's economy.

Cons of the Proposed Funding Model Change

1. Potential Disadvantages for Underperforming Institutions: While the performance funding model may incentivize institutions to improve their outcomes, it could also disproportionately impact underperforming institutions. These institutions might struggle to meet the performance metrics and face financial challenges as a result.

The transition to a performance-based funding model could exacerbate existing disparities among institutions, potentially leading to a decline in resources for struggling universities.

2. Focus on Short-Term Metrics: The performance funding model may prioritize short-term metrics, such as graduation rates, which might not capture the full scope of an institution's impact on students and society. This could lead to a narrow focus on outcomes that may not necessarily reflect the quality of education provided.

Performance-Based Funding Models tend to favor institutions with higher graduation rates, but fail to account for factors such as access to education and student diversity.

Conclusion

The proposed funding model change from the Basic Plus Funding Model to a Performance-Based Funding Model presents both advantages and disadvantages for higher education institutions in Missouri. While the performance funding model can encourage competition and efficient resource allocation, it may also disadvantage underperforming institutions and prioritize short-term metrics. As lawmakers and stakeholders deliberate on the best funding formula, it is crucial to consider the potential implications and strive for a balanced approach that addresses the challenges faced by higher education institutions in Missouri.