What does the term "performance-based funding" refer to?

The term "performance-based funding" specifically refers to a funding model where financial resources are allocated based on the achievement of specific outcomes or performance metrics. This approach is designed to incentivize institutions, such as schools or universities, to improve their effectiveness and efficiency by rewarding those that demonstrate higher levels of achievement, whether that be in student outcomes, graduation rates, or other measurable criteria.

By tying funding to performance, policymakers aim to ensure that taxpayer dollars are used effectively and that educational institutions are held accountable for producing positive results. This model contrasts sharply with models based on random selection, geographic location, or equal distribution, as those do not take into account the measurable success or impact of the institutions receiving the funds. Performance-based funding aims to drive improvement by linking financial support directly to results.