Alberta joins Ontario to implement performance-based funding for higher education and research

Alberta will implement performance-based funding for post-secondary institutions next fall, despite mixed results from other jurisdictions on whether the strategy improves or harms higher education and research outcomes.

Performance funding for Alberta’s 26 post-secondary institutions will start in September 2020 and be phased in over several years, Advanced Education Minister Demetrios Nicolaides told RE$EARCH MONEY.

“We need to fundamentally help build a stronger connection between education and jobs,” he says. “The most important thing is setting up our graduates in the strongest possible way for success after graduation.”

A “transformation” of post-secondary funding in Alberta is long overdue, Nicolaides says. “I was quite shocked and concerned about the lack of any kind of evidence-based approach to how we fund our post-secondary institutions.”

Performance funding shifts a portion of funding dollars from an enrollment-based model to an outcomes-based model. Commonly used outcomes include student retention rates, graduation rates and job placement rates.

Nicolaides says the effectiveness of the approach depends on the percentage of funding tied to performance measures, how many and what types of metrics are used, and how understandable and verifiable they are—potentially through third-party auditing, but that’s yet to be decided.

He says he’ll consult with government colleagues, and with institutions and student leaders, to decide what portion of “at-risk” funding to tie to performance. A percentage of 20% or greater should have impact, but not as high as Ontario’s planned 60%, he adds.

“We would identify a set of metrics and then we would enter into conversations, and ultimately agreements, with each individual institution to explore what are some realistic targets they can achieve related to these metrics,” Nicolaides says.

“Little evidence” that performance funding works

But a University of Regina researcher, who has written a report on performance funding for the Canadian Association of University Teachers, says funding for post-secondary institutions has declined in almost every jurisdiction that has introduced the measure.

“It pits organizations against themselves and against other organizations, while they all fight in the ‘Hunger Games’ for funding,” Marc Spooner, professor of educational psychology, said in an interview.

Universities require stable funding year after year to be able to plan and deliver programs, but funding becomes unpredictable in a performance-based approach, he says. “If you want universities to be truly innovation engines, they have to have stable funding.”

“There are countless research pieces that show when you bring in performance-based funding for research, you lose out on all kinds of innovative ideas. You get a narrowing of research,” Spooner adds.

If governments’ concern is making post-secondary institutions more accountable, university faculty members are already held to a higher standard than most professions, he says. Their performance in teaching, research and service is continuously reviewed internally and, every seven years, by an external body. In addition, students evaluate academics’ teaching, and professional accreditation and granting organizations review and audit their programs and research.

“Based on the work that’s been done over the years, there’s really little evidence to show that performance funding policies in the U.S. actually improve graduation rates or degree completions,” Amy Li, assistant professor of higher education at the University of Northern Colorado, said in an interview.

In a 2018 report for the U.S.-based think tank Third Way, Li detailed the unintended negative consequences of performance funding, including “gaming” of the system and weakening of academic standards. For example, four-year institutions can increase graduation rates by restricting enrolment to students with higher GPAs and college entrance exam scores. Some institutions can inflate grades or reduce the number of credits for earning degrees, to boost graduation rates and secure more performance funding.

Li and her colleagues did find that performance funding initiated positive changes at some institutions, such as increasing academic advising, using data analytics to predict dropout rates, and using “intrusive advising” with students at risk of dropping out.

Careful design and cost-efficient delivery are crucial

Kevin McQuillan, academic director at the University of Calgary’s School of Public Policy, says it’s reasonable for governments investing taxpayers’ dollars in post-secondary education to want proof that the money is being well invested.

“To put it in a broader perspective, we live in a world in which people are measured on their performance,” he says. “In my view, universities trying to dodge this and saying, ‘That’s not for us,’ is probably not a winning strategy.”

However, a performance funding model for Alberta needs to be carefully designed and cost-efficient to administer, McQuillan notes. “The key issues are: how do you create a system that really does measure the things that are important, and that doesn’t simply lead to a situation in which people are gaming the indicators to extract as much in the way of funding from the system as possible.”

It is difficult to measure and link higher education outcomes to jobs in the current or particularly the future labour market, he says. “The economy is obviously the greatest driver of the employment.”

“Despite all the challenges in this area, I think it’s a path that we have to go down because we’re seeing [performance-based evaluation] everywhere,” McQuillan says.

Nicolaides says he wants Alberta’s new funding model to also reduce the paperwork institutions now have to submit each year to obtain funding. He’d like to see the model provide predictable funding over two to three years, based on institutions meeting performance targets.

Alberta's universities performing well on graduation rates, employability

Over the last decade, the enrollment-based Campus Alberta grants that provide operating funding to Alberta’s 26 post-secondary institutions have grown by 106%, while enrollment across all these institutions has increased by only 21%, says the UCP government. Despite this investment, Alberta still has one of the lowest post-secondary participation rates in the country, at 17%.

Also, nine of Alberta’s post-secondary institutions fell below an average graduate completion rate of 60%, according to a report by the government’s Blue Ribbon Panel on Alberta’s Finances.

“Albertans are not graduating and are not getting jobs,” Nicolaides wrote in an op-ed published in the Calgary Herald.

Even though the rate of enrolment at Alberta’s colleges has remained fairly flat over the last decade, enrolment at the province’s universities has actually increased by 53.5% from 2005-06 to 2015-16—the highest growth in Canada, according to a 2018 report by Higher Education Strategy Associates, a Toronto-based consulting firm.

Moreover, Alberta’s three large comprehensive academic and research universities—University of Alberta, University of Calgary and University of Lethbridge—all have graduate completion rates above 80%. That puts them in the top 13 out of 49 Canadian universities in this category, according to Maclean’s magazine’s 2018 rankings.

As for graduates getting jobs, UAlberta is ranked third out of 26 top Canadian universities (and a respectable 87^th out of 758 higher education institutions in the world) in the most recent edition of QS World University Rankings: Graduate Employability. UCalgary is ranked No. 7 in Canada.

Nevertheless, Nicolaides insists performance-based funding can help Alberta’s post-secondary system become more efficient. The Blue Ribbon Panel’s report noted that Alberta spends $8,372 per student (full-time equivalent) on administration, which is nearly double that of B.C. ($4,233) and about 170% more than Ontario ($4,910).

“I believe a significant transformation is greatly needed to ensure that we’re being as prudent [and] as efficient with our tax dollars as possible, and that we’re helping to provide broader direction as well [to post-secondary institutions],” Nicolaides says.

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