Ontario’s hopes for performance-based funding seen as optimistic

US experience suggests budget shift has little impact on colleges’ results

May 12, 2019
Source: Getty

Ontario’s government has been warned that its radical move to allocate 60 per cent of all university funding according to institutional performance might not help to drive up sector standards.

The reward-based logic has strong political appeal: it is a matter of “restoring accountability to Ontario’s postsecondary education system”, the provincial government, which is led by Doug Ford, said in announcing the plan.

But multiple studies of the US experience have struggled to show that such a move achieves the sought-after results, given the wide variety of possible measures, the difficulty of driving desired behaviours and the likelihood of unintended consequences.

“In general,” said Robert Kelchen, an assistant professor of higher education at Seton Hall University in New Jersey, “performance-based funding has had modest or no effects on student outcomes.”

Ontario is nevertheless diving in, promising to tie 60 per cent of its funding for its 45 public colleges and universities to performance-based measures by 2024.

One of the key changes that Ontario plans to make from many US versions, said Canadian higher education consultant Alex Usher, is to seek a broad cross section of institutional activities in the 10 measures it intends to use.

The measures employed by many US states are often just different metrics of student progression and completion, said Mr Usher, president of Higher Education Strategy Associates. “Even though there may be a half-dozen indicators, they are all measuring the same thing,” he said.

Ontario, by comparison, plans heavier emphasis in such areas as research and interactions with business, Mr Usher said. A possible problem there, however, is that smaller stakes for each area make it more difficult to force behavioural change in any of them, he said.

Even Ontario’s goal of 60 per cent can overstate what is at stake. Taking into account outside revenue sources, provincial funding makes up only about 22 per cent of total operating revenue for universities.

Yet even that is enough to raise protests from opposition politicians and staff and students in higher education. The Ontario Confederation of University Faculty Associations has suggested that Mr Ford provide all institutions with more funding rather than impose a system that “pits one university against another”.

The Ford government has urged patience. The government does not plan any “rank ordering” of institutions, which instead will be measured against their own past performance, a spokeswoman said. Six of the 10 criteria reportedly will concern student outcomes, and the others will reflect outside economic and community engagement.

Experience has shown, said Scott Boelscher, senior associate at consulting firm HCM Strategists, that “a model that results in large annual shifts of funding may do more harm than good”.

The first US state to adopt performance-based funding was Tennessee, in 1979. It now allocates about 85 per cent of its college funding through performance-based systems, according to a study last year by the New America policy research institute.

A 2017 analysis of Tennessee by the policy study group Research for Action found gains on some students outcomes and non-existent or negative effects on others. A 2016 study of Tennessee by the Lumina Foundation found no strong evidence either way.

Other studies in other states also have failed to find unambiguous evidence of effects.

And where institutions are clearly rewarded for performance, Dr Kelchen said, states are facing unintended consequences such as colleges avoiding enrolling tougher-to-serve students.

Any such complications and negative effects, however, appear unlikely to dent the political attractiveness of performance-based funding, Dr Kelchen said.

“Few governments are willing to give colleges any more money without tying at least a piece of it to student outcomes,” he said.


Gerard Seijts, director of the Ian O. Institute for Leadership at Ivey Business School, Western University, will discuss university leadership, and how educators can promote leadership skills in students, at Times Higher Education’s Teaching Excellence Summit, which is taking place at Western University, in London, Ontario, Canada, from 4-6 June 2019.

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