New Report: State Funding Approaches for Public Colleges and Universities in the Midwest

A new publication is available in the college affordability and finance series, State Funding Approaches for Public Colleges and Universities in the Midwest. The report details how Midwestern states provide operating revenue for public postsecondary institutions; provides an overview of some possible tradeoffs of funding approaches; and summarizes research on the effects of different funding mechanisms. Among the findings, the report shows that most states in the Midwest utilize a funding formula based on student enrollment, performance, and/or a percentage change from the prior year’s funding level. These funding approaches come with some distinct tradeoffs that can affect funding volatility, equity, and state higher education goals. Moreover, a summary of outcomes research provided evidence that some funding models may be more effective than others. Performance-based funding models in particular have had limited positive and sometimes negative effects on the number of credentials completed. In contrast, a recent study suggests that funding based on student enrollment may be equally or more effective in producing degrees compared to other funding models. The report concludes with a set of policy options for guiding efforts to evaluate and improve state funding approaches, such as designing formulas to increase educational attainment, promote operational efficiencies, and support students who have been historically underserved in higher education.