Performance-based funding for higher education – could it happen here?

I’m guessing that even the most ardent of UK wonks haven’t been eagerly awaiting the the announcement from the Alberta (Canada) Government of its hotly-anticipated performance based funding system for tertiary institutions.

Maybe they should have been.

Regular readers will know that we’re interested at Wonkhe in the development of so-called “performance based” funding as it iterates around the world, not least because as it appears, versions might offer some clues as to where OfS’ T-funding review goes, and if (and it’s a big if) some of the tuition-fee subsidy gets switched into grant (Augar-style) what that could mean for English institutions.

This matters because some fairly lazy thinking in the sector has appeared to assume that post-ONS, wresting control over the HE budget will mean a return to HEFCE-style funding through places, and top ups for access and high-cost subjects.

We’re not sure it’s that simple. Around the world, schemes are being developed to link funding for tertiary institutions to (metrics-based) performance against a set of economic, political and social goals rather than just opportunities and costs. We already have outcome agreements in Scotland (coming in Wales), but what if huge swathes of funding were directly attached to those individual outcomes?

Ushering in the changes

Alberta is very much an outlier in wider Canadian politics, it leans fiscally conservative – with a long standing commitment to very low taxes (a flat rate of 10 per cent) which would offer little scope for investment in public services were it not for the wealth of the state, which is rich in oil and natural resources. Historically student fees (no more than 30 per cent of the cost of a degree for Canadians, full cost for others) have played a significant role in university funding alongside grants from the Ministry of Advanced Education.

Noted Canadian HE wonk Alex Usher (who is well worth a follow on Twitter) has been warning readers that the Albertan government has been on a mission to balance its budget after several years of deficits, and had identified higher education as an area to target.

He’s got a helpful way of thinking about these things, too:

Personally, I’m not of the opinion that no government should ever cut institutional transfers. Governments reflect public opinion, and if public opinion decides it would like to spend less on a particular good, that’s fine.

It’s a clever line that – largely because one of the central ideas of performance based funding is to tie the democratically expressed priorities of the electorate, through politicians, to the funding that providers get. The livestreamed press conference youtube video even promised that the Education Minister Demetrios Nicolaides would:

announce transformational changes that connect education to jobs and give taxpayers more value for every dollar spent in the post-secondary system.

…which sounds awfully familiar. So what got announced?

Problems and solutions

Tertiary education policy and funding is organised by state in Canada, and Alberta invests a not-insignificant $2bn into post-secondary education – 26 universities, colleges and polytechnics across the province through the “campus Alberta grant”. But for Nicolaides, there’s a problem:

Government funding is not tied to the achievement of any targets, progress towards goals or to the changing economic and labor demands… the current funding structure does not link funding to the achievement of specific goals or priorities for the province, such as ensuring the required skills for the current and future labour market. Furthermore, today’s difficult economic times demands that government be a good steward of taxpayer dollars.

The solution? Easy:

A stronger post-secondary system that ensures young Albertans can find rewarding careers. A stronger system ensures taxpayer dollars are being used to support teaching and research instead of growing administration. And among other things, a stronger system ensures we are proactive in training the workforce of tomorrow.

This “total transformation in government funding to our post-secondary institutions in a single sentence” is a performance-based funding model with some fascinating features. First, it’s a model that will be “noncompetitive” – institutions won’t compete against each other, only against themselves as they seek to improve their own performance against a series of targets.

Right now the UK government doesn’t feel like one tied to “market competition” dogma (and indeed shows signs of wanting to play a more active role in “markets”) so an approach like this could bring benefits – although as Alex Usher notes, this is similar to developments a while back in Ontario. “Competing against yourself” can mean hidden cuts, because institutions cannot increase their share, only lose in absolute terms.

Metrics matter

The amount of funding tied to performance outcomes will begin at 15 percent for 2020/2021 and gradually increase over three years to a maximum of 40 percent by 2022/23. To do that, the government will evaluate performance against a maximum of around 20 specific key indicators, gradually introduced over the next three years to ensure that “we use the best possible metrics that have rigorous and verifiable data sources”.

Officials from Nicolaides’ department will begin consulting with the sector “to ensure that everyone has an opportunity to discuss the indicators” and of course, “to suggest new ones as well” (though presumably not to suggest metrics-are-bad outright). But as an opening gambit there are “several indicators that government would like to see” which include:

• graduation and completion rates;
• graduate employment;
• experiential learning;
• enrolment, both domestic and international;
• commercialisation of IP research capacity;
• quality of teaching and student experience, and
• student satisfaction.

These all look like – in one form or another – metrics that Government and/or OfS are collecting here now. Cleverly, “these are just some examples” of key performance indicators that may be used to establish targets and that institutions will have to reach, and in a nod to mission diversity and student voice, the minister also announced that

each institution [will have] have the ability to identify key performance indicators that are most important to them, which is why each group, both students and our institutions themselves, will have the ability to define a key performance indicator of their own”

Clever clogs

This is perhaps where things might get too clever for their own good. Key performance indicators “will also be weighted differently depending on the institution”, so whereas a university’s highest weighting may be on achieving targets related to medical research, a college’s heaviest weighting may be on growing the number of domestic students. In other words – they’ll each have a TEF, but it’ll be a TEF of its own. Neat.

There’s also no talk of fines for poor performance here either – a framework like this sounds much more reasonable:

Institutions that meet all of their targets will receive 100 percent of allotted funding. And if an institution does not meet their targets, it will still receive a portion of funding that’s allocated proportionate to the level of achievement. So I’ll give you an example. If the U of A has a target to produce 5 percent more tech grads, but only achieves 80 percent of that goal, they would receive 80 percent of a lot of funding for that metric.

To do all this (and simultaneously talk about reducing administrative burden), they’re abolishing annual reporting and funding settlements and shifting towards three year “investment management agreements”, which sound awfully similar to Access and Participation Plans to me. This is, he says, a “model that exists around the world, including Austria, Ireland and Finland and in Hong Kong as well”.

Admittedly, Alberta is not England, or the UK. The differences in culture, scale and concepts of autonomy are vast. But there are fascinating things to think about here. As Alex Usher notes, the game now becomes how the targets are set. If you make them easy to hit, then you can claim to be hugely performance-based without actually threatening anyone’s income. If they make the targets hard, then big cuts are in store. Either way, you look, sound, (and in some iterations, are) more in control of what happens to the money. Versions of this will be devilishly tempting to regulators and UK Governments in the years ahead.

If you’re keen to know the latest on performance-based funding around the world, Alex Usher’s paper on it from the summer is well worth your time.