Paradox of an A+ Education on Failing Funding

President Obama’s push for report cards on higher education institutions is said to benefit students, but is this necessarily true? The Department of Education and the Obama Administration hope that information on debt, affordability, and access will inform students to make better choices for their future, and motivate colleges to perform to a higher standard. They hope that their focus on other rankings than status and reputation can open the doors for other universities on the market and give students a more realistic picture of their options.

This all sounds well intentioned, and probably is. But, I start to take an issue with these rating systems when they are tied to allocation of funds. It has always seemed paradoxical to me that schools that aren’t up to snuff get less funds. From the view of the economist side of my brain, I guess that if you want to maximize the utility for state funds, you would only want to fund schools that perform. But, seems to me that this only causes the rich to get richer and leaves underfunded schools in the dust. For example, if a school does not perform adequately and is cut in state assistance, it therefore has less funds to perform the actions it was previously undertaking. To regain those funds, a school would presumably need to achieve the higher standard it could not previously reach, but with reduced funds than it had originally. This does not work when funding cuts overpower the effect of motivation to perform. These incentives need to be ones of benefit and not penalty.

In the McKeown-Moak piece it mentions that Wisconsin does a form of performance based funding. Our criterions include degrees awarded, time to degree, employer and alumni satisfaction, and sponsored research funds. This greatly privileges research universities, and leaves little for our many community colleges, who usually have a greater number of non-traditional students.

We need to come up with a funding system that is not so quick to monetarily penalize institutions based on performance. We also need to ensure that the criterion that we are using treats all types of universities equivalently. This ensures that all of our institutions are able to succeed.