State Strategies for Financing Career and Technical Education

States' Uses and Perceptions of Performance-based Funding (AY2011–12)

Performance-based funding (PBF) is an approach to distributing funds that is conditioned on student or program performance. Fiscal awards are given to providers that meet state-established benchmarks or targets, allowing states to direct funds to high-performing programs.

The CTE community is increasingly considering the use of PBF to incentivize local provider performance. As part of the NASDCTEc survey, directors were asked whether their states used PBF strategies in AY 2011–12 to allocate either state or federal funding.

Two states (Texas and South Carolina) reported using PBF to allocate federal perkins IV funds, with five states (Arizona, Florida, Kansas, Missouri, and West Virginia) using PBF to allocate state CTE funds. These seven states condition funding for CTE programs based on LEA performance on federal or other performance measures, such as placement of CTE students into postsecondary education or employment; attainment of industry-recognized credentials; or CTE completion rates.

Exhibit 4: Secondary-level performance-based funding for CTE programs, by state, funding source, and performance criteria
State Funding source Performance criteria
Arizona State Placement of secondary CTE completers into related postsecondary programs or employment
Florida State Number of students who complete an industry-certified career or professional academy program and attain industry certification and a high school diploma
Kansas State Industry-recognized credential attainment
Missouri State Placement of secondary CTE completers into related postsecondary programs or employment
South Carolina Federal Number of CTE completers
Texas Federal Attainment of state performance targets for five measures: Academic attainment in reading/language arts, academic attainment in mathematics, completion rates, graduation rates, and placement rates
West Virginia State Programs’ pro rata share of the three–year average number of CTE completers
NOTE: CTE means career and technical education.

At the postsecondary level, no state reported using PBF to allocate federal perkins IV funds, while four states (Arkansas, Georgia, Minnesota, and North Dakota) reported using PBF to allocate state funds. Some states making use of PBF reported its application to the performance of the entire community or technical college system, rather than tying it specifically to CTE participation rates or outcomes. Instead, they use PBF at the system level as a strategy for improving community or technical college performance. Examples of the performance measures used to distribute postsecondary PBF funds include graduation rates and credential or degree attainment.

Exhibit 5: Postsecondary-level performance-based funding for CTE programs, by state, funding source, and performance criteria
State Funding source Performance criteria in formula
Arkansas State End-of-course enrollment, student retention, progression toward degree completion, credential attainment, transfer activity, research activity, and graduation rates for underserved populations
Georgia State Graduation rates
Minnesota State Increased credential or degree attainment, increased completion rates, increased employment placement in a related field, and process measures related to decreasing instructional costs and reallocating funds from previous years
North Dakota State Weighted credit hours according to course level and instructional program classification
NOTES: CTE means career and technical education. PBF means performance based funding.
SOURCE: National Association of State Directors of Career Technical Education Consortium (NASDCTEc). (2013, August). Survey of State CTE Directors. Secondary Data Analysis. Supplemental survey information from state websites.

The NASDCTEc survey collected additional information from states on their interest in adopting PBF and related training needs. Findings indicate:

  • States’ reasons for not adopting PBF vary, with the most common reason among secondary respondents reported as a lack of interest among state leaders. Postsecondary respondents also selected this reason as the most common reason for not adopting PBF to allocate their federal perkins IV funds. However, postsecondary respondents selected “other” as the most common reason for not adopting PBF to allocate their state funds, with their write-in responses indicating that many states were currently exploring the use of PBF.
  • Almost half of state respondents at the secondary (46 percent) and postsecondary (43 percent) levels expressed an interest in adopting PBF to allocate a portion of their federal perkins IV funds. Approximately two-thirds of secondary (68 percent) and postsecondary (65 percent) respondents expressed a need for training on PBF formula development and implementation if PBF were to be required by the legislation.
  • States have limited to no experience with pay-for-success or social impact bond programs, which provide an incentive for private investment in public programs. While no state reported currently using a pay-for-success model for CTE, two state respondents from secondary and one from postsecondary education were aware of pay-for-success models in other educational contexts within their state. No states are currently using pay-for-success to promote investment in CTE programs, although about a third of respondents at both the secondary and postsecondary educational levels expressed interest in learning more about the potential applications of these models.