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In High Demand: Performance Funding Policy Impacts on STEM Degree Attainment

Mon, April 11, 11:45am to 1:15pm, Convention Center, Floor: Level Three, Ballroom South Foyer


The national college completion agenda has prompted the growth of performance funding policies for higher education, which allocate state funding for public colleges and universities based on student outcomes in addition to enrollments (Burke, 2002; Dougherty & Natow, 2015). There is a particularly strong focus on graduating students in STEM fields, to fill a national need for a highly skilled workforce, and to drive innovation and global competitiveness (U.S. Department of Education, 2015). Thirteen states have incorporated a special STEM funding incentive (performance metric) for completions in these “high demand” fields (Li, 2014; NCSL, 2016). This study investigates the following question: Do special STEM incentives in performance funding policies affect degree completions at four-year institutions?

I created a national dataset of 476 public, bachelor’s granting institutions from years 1995 to 2013 for a sample size of N=9056 college-years, and estimated the policy treatment effect using a difference-in-differences design. I added two-way fixed effects to account for unobserved heterogeneity across colleges and across years, and included a series of college- and state-level control variables (Angrist & Pischke, 2009; Wooldridge, 2010).

Results suggest that the STEM incentive had no aggregate effect on the number of degrees awarded in these “high demand” fields. Interestingly, there was a slight negative effect starting in the 5th year after the policy was in place. Institutional characteristics such as Carnegie classification and tuition rates, and student demographics such as undergraduate female enrollment contributed to STEM degree completion.

Therefore, applying a “funding for results” model to public higher education does not necessarily improve degree outcomes, at least not within the time period that STEM performance funding incentives have been in place. One explanation is that the barriers to students graduating in STEM require years of institutional efforts to change—for example, improving academic advising for students and addressing the chilly classroom climate that female students face, which leads to a major gender gap (Fry, 2014; Gayles & Ampaw, 2014). A broader question is why do state policymakers continue to pursue performance funding if there is limited evidence it improves overall student outcomes (see Hillman, Tandberg, & Fryar, 2015; Tandberg & Hillman, 2014). In a separate dissertation paper, I find that organizations such as the Lumina Foundation are major drivers of the policy. Applied to practice, this raises the question of whether the voices of college campuses, and especially faculty and staff who work day-to-day with students, are heard in the continual policymaking process of performance funding.