Alabama Lawmakers Explore Performance-Based Funding for Higher Education
Montgomery, AL – In a bid to enhance accountability and performance in Alabama’s higher education system, state lawmakers are preparing to examine the implementation of an outcomes-based funding formula for four-year colleges. Beginning in late August, the Legislature’s education budget and policy committees will deliberate on linking a portion of state funding to metrics like graduation and retention rates, as articulated by Senator Arthur Orr, R-Decatur.
Orr emphasized that the aim is to incentivize universities to improve their performance while ensuring their participation fosters a mutually beneficial system. This initiative follows the recent RAISE Act, which allocated $166 million to support K-12 schools facing academic and economic challenges. The new funding model may draw resources from the Educational Opportunity Reserve Fund, which currently exceeds $1.1 billion, established by lawmakers in 2023.
While specific performance indicators are still under discussion, possible metrics could focus on graduation rates and the production of high-demand degrees, such as nursing and engineering. Orr clarified that funding wouldn’t be diminished for institutions; rather, improved outcomes might lead to additional funding, enhancing educational offerings across diverse universities.
Alabama’s 14 public universities, with varying goals and challenges, will not compete against one another for funding. Executive Director of the Alabama Commission on Higher Education, Jim Purcell, noted the importance of institution-specific goals and retaining equity for schools serving diverse missions.
The conversation around performance-based funding for higher education has been revisited following delays due to the COVID-19 pandemic. Discussions are expected to culminate in proposed legislation by the 2026 session, with the potential for some funding changes to take effect as early as fiscal year 2027.
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