Embracing Equity in Indiana's Performance Funding Formula

By Teresa Lubbers
Indiana Commissioner for Higher Education


Higher education has never been more important. That’s why Indiana, like many states, set a goal that 60 percent of adults will have a quality degree or credential beyond high school by the year 2025. Currently, only 43.4 percent of Hoosiers hold such a credential.

One of our key strategies for addressing Indiana’s higher education attainment gap and the economic well-being of all Hoosiers is performance funding—also known as outcomes-based funding. Indiana’s performance funding formula distributes money to colleges based on improvements in student success and completion.

As more states adopt educational attainment goals, many are also implementing performance funding models for their state higher education institutions. According to the Lumina Foundation, Indiana was one of 25 states to implement a performance or outcomes-based performance funding model in fiscal year 2017. In addition, several other states have developed, but not yet implemented a model.

History of Indiana’s performance funding model

Indiana’s nationally recognized performance funding model has developed in an evolutionary process going back to 2003. Over the years, we have achieved a balance between metric continuity and the need to adjust our metrics to ensure they are aligned with our state’s workforce needs—specifically to help us reach our state’s 60 percent attainment goal.

Specifically, our model has been recognized for its focus on completion, including overall completion, on-time completion and at-risk (Pell) completion—three areas in which we are gaining ground. In addition, our model recognizes the need for STEM degrees and student persistence.

Developing an equity-focused performance funding model

We know there is no way to reach our attainment goal without ensuring access and completion for first generation, low-income and underrepresented populations. While some of our metrics are designed with the broad student population in mind, some are specifically carved out to recognize the equity imperative. For instance, we have implemented an at-risk completion metric that rewards completion for at-risk students generally and then provides additional payment for at-risk students who complete on time.

In addressing the importance of equity with a performance funding formula, it is also critical to consider the mission of each institution and the students they serve. The latest version of our performance funding model provides colleges with multiple opportunities to earn funding based on mission differentiation, including STEM programs specific to their mission.

Mission differentiation is not only addressed through the metrics themselves, it is also addressed through how progress is measured and recognized in the formula. Each institution is evaluated based on its own level of improvement rather than its performance relative to other institutions.

Because each institution serves different student populations, it is critical for us to work directly with the institutions when evaluating metrics and considering changes to the formula. These changes are not only important to the institution and the students they serve, but also to the state’s economy. 

Developing and sustaining a performance funding formula depends on working closely with institutions, state legislature, and the Governor’s office. This buy in from our partners has enabled us to maintain and improve Indiana’s performance funding formula over the years.