Stronger Fiscal Incentives Can Improve High School and Postsecondary Outcomes

Governors and state legislators can influence how high schools and colleges spend their resources through fiscal incentives that encourage schools to improve students' outcomes, chiefly college readiness and high school and postsecondary completion rates. Several finance policies can lead to higher student achievement.

• Give principals greater autonomy to spend instructional resources. Principals need discretion to direct resources in ways that match curriculum, instruction, and support services with students' identified needs.

• Provide support to high-quality education options. Competition in education is one promising way for states to improve the effectiveness and efficiency of their public school systems. Current state finance policies impede the supply of education options by providing less money for these options and by limiting the flexibility K-12 and postsecondary educators need.

• Reward public colleges and universities that achieve postsecondary degree completion goals. Performance funding in higher education can influence higher education outcomes, but the emphasis on degree completion needs to be strengthened. Governors and state legislators should consider providing greater general fund support to colleges and universities that achieve or exceed an institution-specific benchmark for postsecondary completion.